Eccentric Orbits

The Iridium Story - How a Single Man Saved the World's Largest Satellite Constellation From Fiery Destruction

John Bloom

• Publisher: Atlantic Books
• Year: 2016
• ISBN:
  9781611859560
• Topic: Betriebswirtschaft
• Subtopic: Business allgemein

In the early 1990s, Motorola, the legendary American company, made a huge gamble on a revolutionary satellite telephone system called Iridium. Light-years ahead of anything previously put into space, and built on technology developed for Ronald Reagan's 'Star Wars,' Iridium's constellation of sixty-six satellites in six evenly spaced orbital planes meant that at least one satellite was always overhead.

Iridium was a mind-boggling technical accomplishment, surely the future of communication. The only problem was that Iridium was also a commercial disaster. Only months after launching service, it was $11 billion in debt, burning through $100 million a month and bringing in almost no revenue. Bankruptcy was inevitable - the largest to that point in American history. It looked like Iridium would go down as just a 'science experiment.'

That is, until Dan Colussy got a wild idea. Colussy, a former CEO of Pan Am, heard about Motorola's plans to 'de-orbit' the system and decided he would buy Iridium and somehow turn around one of the biggest blunders in the history of business.

Eccentric Orbits masterfully traces the birth of Iridium and Colussy's tireless efforts to stop it from being destroyed, from meetings with his motley investor group, to the Clinton White House, to the Pentagon, to the hunt for customers in special ops, shipping, aviation, mining, search and rescue. Impeccably researched and wonderfully told, Eccentric Orbits is a rollicking, unforgettable tale of technological achievement, business failure, the military-industrial complex and one of the greatest deals of all time.

Chapter 1

THE CONSPIRATORS

APRIL 15, 2000
KENNEDY WINTER WHITE HOUSE,
PALM BEACH, FLORIDA

It was the season of the dot-com bubble. Computer jargon had come into vogue—“Y2K” instead of “2000”—which was more than ironic for the year when all things high-tech became suspect. It was the spring when the NASDAQ stock exchange crashed, bringing down half of Silicon Valley with it, but that was long after Iridium had been taken off the trading board anyway, a symbol of failure and corporate hubris of the highest order. By the time Dan Colussy started studying Iridium LLC, more out of curiosity than anything else, it was being talked about in terms reserved for iconic business failures like the Edsel, Betamax tape, and, more recently, Pets-dot-com. As a brand, Iridium seemed as shopworn as Bill Clinton, scarred by the Monica Lewinsky scandal, entangled in a Balkan war no one understood, trying to preserve his legacy in the few months he had remaining. There couldn’t have been a more turbulent moment to tell a cranky President that seventy-four American satellites were about to be intentionally put into uncontrolled death spirals that would end up destroying the world’s largest man-made constellation.

When he did hear about it, Clinton was reportedly incredulous. Was there a chance, he asked, that one of the errant satellites would be dangerous to the public? Demolish a bus full of schoolchildren in Kansas—something like that?

“Well, Mr. President,” came the answer, “not likely, but we can’t rule it out.”

Clinton’s response was unequivocal: Not on my watch.

What his lieutenants had failed to tell Clinton was that the fate of Iridium might not be within his control. The satellites had been launched by private industry, without a single government dollar being invested. In fact, there were corporations owned by sovereign nations, including Russia and China, that were part owners, whereas the United States was a mere customer. The satellites might soon be crashing to Earth whether Clinton liked it or not.

Fortunately, unbeknownst to the Commander in Chief, a meeting was taking place in a second White House, a makeshift shirtsleeve White House from another era, an oceanside villa where another Democrat had solved other crises four decades earlier. It was not entirely coincidence that when two old Harvard classmates convened to talk about the ailing Iridium system, they did it in Joseph Kennedy Sr.’s house at 1095 North Ocean Boulevard in tony Palm Beach, Florida. John Castle, the current owner, was an American history buff and, more to the point, a lover of the grand gesture. It was in this white Mediterranean getaway home where Castle and his old friend Dan Colussy—two men who had never before had anything to do with operating satellites or telephone networks or working in outer space—would have a what-if luncheon that might, just possibly, solve the President’s problem.

The meeting in the Kennedy Winter White House that spring happened because the phone in John Castle’s yacht stopped working.

On March 17, 2000, Castle’s forty-two-foot Hinckley Sou’wester, named the Marianne in honor of his wife, was locking through the Panama Canal, north to south toward the Pacific Ocean, with Colussy aboard. The Marianne was making a round-the-world voyage, but since Castle was busy running his eponymous New York investment bank, Castle Harlan, he could join the yacht only sporadically. The rest of the time he lived vicariously through satellite phone conversations with his captain. The previous week, as the yacht approached Central America from the Atlantic side, Castle had called Colussy to ask his friend if he’d ever traversed the Canal and, if not, would he like to come aboard for a few days. Actually Colussy had traveled through the Canal, but not since 1954, when he was a boyishly skinny ensign and navigator on the Coast Guard cutter Blackhaw, serving under a dapper captain who insisted that the ship stop at every resort and tourist spot between Charleston and Honolulu so that he could disembark in his dress whites and . . . well, Colussy was never sure what the captain did exactly, but he was a mustang officer who loved the nightlife. Colussy accepted the invitation to fly down and make the passage, as he wanted to see how the Canal had changed since it was returned to Panama in 1999. He boarded the yacht at the port of Colón, in Limon Bay, and enjoyed naval shoptalk with the captain all through Gatun Lake and the Gaillard Cut.

And then Castle’s Iridium phone went dead. Fortunately the Marianne was close enough to Gamboa for Colussy to get a cell signal and get back in contact with Castle. Colussy had known Castle for almost four decades and sat through many tense meetings with him, so he knew Castle was crotchety and easily annoyed. On this day he was yelling about Motorola’s decision to shut down Iridium. Castle was especially upset because it was the only phone that worked all the time, at all longitudes and latitudes, without any kind of delay.

Listening to Castle rant, Colussy had an epiphany.

“John, I already know all about this.”

It was more or less coincidence—one of a hundred coincidences that would favor Colussy’s quest that year—that a neighbor of his in Anne Arundel County, Maryland, was a midlevel Motorola executive. If he’d been a high-level executive, he never would have talked to Colussy. If he’d been at a lower level, he wouldn’t have known enough. But Dennis Dibos was perfect. When you live in the moneyed suburbs of Washington, D.C., especially the area around Annapolis, the canonical six degrees of separation becomes two or three, so maybe it wasn’t such a coincidence after all. Colussy lived half the year in Florida and the other half in Glen Oban, an unincorporated area of mansions arrayed across a picturesque part of the Broadneck Peninsula, where average incomes were 170 percent of the national average and where the men who ran the military-industrial complex had established a Republican enclave in an overwhelmingly Democratic state. It was there, during the previous summer, that Colussy had first noticed the struggles of Iridium in the financial press and decided to purchase a little of the vastly deflated stock, thinking, Someone will save this thing. It’s too valuable to waste. The following day he asked his wife, “Don’t you golf with someone who’s married to a guy who works for Motorola?”

In fact, she did, and Helene knew everything he needed. She knew the name of the woman in her golfing group (Jan), the name of the woman’s husband (Dennis), his rank at Motorola (Vice President of Public Relations), and the reason he was able to live in Annapolis while commuting to Motorola headquarters in Schaumburg, Illinois.

“Invite them to dinner” was all Colussy said.

Dennis Dibos, it turns out, was not exactly close to the satellite division of Motorola. His area of responsibility was, in fact, golf. He flew around the country setting up golf tournaments for the company, and he was the current champion at Chartwell, the club the Colussys had just joined. But as luck would have it, another couple had already been invited to dinner that same night: recently retired four-star Admiral Chuck Larson and his wife, Sally. Since Dibos was himself a reserve naval officer, this was like a club boxer being invited to a private dinner with Muhammad Ali. Admiral Larson had been Commander in Chief of CINCPAC, the U.S. Pacific Command in Honolulu, pretty much as high as you can go in the Navy, but he was better known locally as a popular superintendent of the Naval Academy—in fact as “the man who saved the Academy,” having been brought in for a second stint in the job to clean up an institution mired in cheating scandals, drug scandals, sexual-assault scandals, and even a stolen-car scandal. Larson was the kind of impressive military figure that normally exists only in fiction, having been a Top Gun fighter pilot, a nuclear submarine commander running sensitive Cold War spy missions, and, incidentally, the guy who carried the black suitcase containing the nuclear launch codes for President Nixon. But if Colussy thought he needed Larson to loosen up Dibos, he needn’t have worried. The weather was warm, so dinner was served on the terrace overlooking the Severn, and the conversation was so effortless that Colussy decided he didn’t need to waste any time. Before dinner was over he turned to Dibos and said, “I’m curious about Iridium. What can you tell me?”

Dibos was more than happy to expound on the subject and turned out to be a fount of information, mostly negative company scuttlebutt about what was regarded as Motorola’s biggest mistake of recent years. Iridium was bad news, he said. It was a narrowband system in the emerging broadband world. It didn’t have enough capacity to carry the kind of data people would need in the future. The Iridium phone was cumbersome and much too large. Motorola was anxious to get rid of the whole thing. He knew most of the history of the project. He knew the three executives directly in charge of Iridium and gave Colussy their names. He also knew why the satellites were being abandoned, or at least the official version of that story. He knew approximately how many billions had been spent on the system, and he knew where the bodies were buried.

Colussy made a few follow-up phone calls after the dinner party, but nothing too serious. He was still skeptical about Motorola’s threats to force Iridium into bankruptcy, especially since he’d learned from Dibos that Motorola had only an 18 percent ownership share while the rest of the company was held by venture partners around the world, many of them tied directly to powerful countries like China, Russia, India, Japan, and Saudi Arabia. Colussy had always been a “small-cap guy”—Wall Street jargon for companies valued under a billion ­dollars—so Iridium sounded a little too rarefied, the kind of company that would need the global support of a true large-cap multinational like Sony or AT&T. It was certain to be attractive to anyone trying to establish a stronger foothold in the booming global telecom markets. Colussy purchased some Iridium stock, certain that once the company was bailed out, the price would soar—only to be shocked when, less than a month after meeting with Dibos, Iridium did go ahead and file for Chapter 11 bankruptcy protection. He still didn’t believe it could be anything more than a reorganization. When he saw that Craig McCaw had expressed interest in buying the company, he assumed the whole saga had fallen into the category of one big organization selling its mistake to another big organization. McCaw was the original cellular visionary, having bought up the very first cell-phone licenses in the 1980s and built a company that he eventually sold to AT&T for $20 billion. McCaw was in many ways the perfect choice to figure out the next stage of telecommunications.

But now that had all turned sour. Motorola went through a six-month due diligence process with McCaw, who said he would probably buy Iridium out of bankruptcy for $600 million, but McCaw backed out at the eleventh hour, sending the Motorola board of directors into paroxysms of rage. Now apparently they’d simply thrown up their hands and shut everything down.

As Castle continued to rant about his dead satellite phone, Colussy felt an inner pang that was close to outrage. He’d been in love with aeronautics since he was a boy, watching wide-eyed as barnstormers barreled into town to star in “air circuses” at his great-uncle’s dairy pasture in Coudersport, Pennsylvania, later to become Colussy Brothers Airport. He’d then gone on to become a licensed commercial pilot and airline executive, so everything about aerospace fascinated him. He couldn’t believe that such a revolutionary scientific achievement was about to be destroyed.

The conversation between the two men was brief, but it brought home the immediacy of the situation: if Motorola was actually turning off the phones, then maybe this was something more than a typical Chapter 11 reorganization.

Colussy disembarked in Panama City, flew back to his winter home in Palm Beach Gardens, and resumed working on his short irons. But he continued to brood over the satellites. Why would Motorola shut off the phones of sixty-three thousand paying subscribers? Even if the birds were destroyed next month, why wouldn’t they keep the revenue flowing until the last moment? More to the point, why couldn’t a giant corporation like Motorola restructure the company with a new business plan? A few days later Castle called from New York to say that Iridium service had started up again as the Marianne neared the Cook Islands, but his sources at Iridium were warning him that as soon as his yacht crossed the 120° west longitude line, the service would be lost again as it was passed off to the Thailand earth station, which was no longer operational. What was going on?

Colussy decided to investigate, and a few days later he called Castle again.

“What do you think of Iridium as an investment?” Colussy asked his friend.

“At the right price, I like it,” said Castle.

And so the conspiracy began. Hence on this Saturday in mid-April Colussy brought his investigative findings to the very room in Palm Beach where, four decades earlier, John F. Kennedy had written the words “Ask not what your country can do for you—ask what you can do for your country.” The room was small, but Castle took pains to make it look as it had when Senator Kennedy wrote Profiles in Courage while recovering from back surgery. From the window you could see the six palms planted in the exact positions they’d occupied when the Kennedy boys were playing touch football on the soft zoysia grass. It was a place, Castle thought, imbued with good mojo, an incubator of ideas.1

John Castle lived in a realm of opulent display and First World creature comforts. An investment banker who preferred the nineteenth-century term “merchant banker,” he gave the impression of a throwback tycoon straight out of a Dickens novel: Falstaffian in his girth and appetites, puffy faced and crinkly eyed, fastidious in his refined tastes for Thoroughbred horses, fine wines, society balls, and Park Avenue penthouses. Castle was the very picture of East Coast Old Money, although that picture was misleading. His money was brand spanking new, as he had grown up in the small town of Marion, Iowa, a precocious Eagle Scout who left to attend MIT and scrap his way up through the rarefied investment banking world of New York City. He was regarded, in fact, as the “savior” of legendary investment bank Donaldson, Lufkin & Jenrette (DLJ) during the free-spending eighties, an era when Wall Street’s dealmakers were regarded as wizards and alchemists, existing as they did in an arcane universe of leveraged buyouts, corporate raiding, junk bonds, and exotic securities. Castle thrived in that world long after its more famous proponents had either crashed and burned or become persona non grata among their peers. His reputation—first at DLJ, then at his own boutique bank—never lost its luster, even when one of his high-flying takeovers would go unexpectedly bad.

Colussy, who drove over from his winter home facing the eighth hole at BallenIsles Country Club, was also self-made, but in every other respect Castle’s opposite. He had grown up in a small Pennsylvania town, then excelled at the Coast Guard Academy, before going on to run Pan American World Airways and several other companies. Soft-spoken, slender, athletic, low-key, a fan of classic jazz and real yachts (the kind that have sails), Colussy had an affable manner reminiscent of Jimmy Stewart. Colussy’s story was, in fact, almost stereotypically American, complete with a 1953 wedding to a New England beauty who became a homemaker and mother, two daughters he sent to private schools in both New and ...