case study Iridium
Iridium Case Study
Iridium is a famous case in which Motorola and other well known companies invested about $5 billion in a satellite venture that would enable a person to use his cell phone around the world. The investment included more than $2.2 billion in debt. Soon after operations began, the company declared bankruptcy and its assets were ultimately sold for only $25 million, leaving the lenders with a total loss. It is obvious that projections made by the company and endorsed by the most prestigious banks on Wall Street were comical leading to massive losses for banks, debt investors and equity investors. It is also clear that the company made some mistakes in marketing such as not having sufficient phones available after a major advertising campaign. The questions I would like you to address in this case are what was underneath the crazy assumptions and financial projections made by these highly respected financial institutions and how could the banks and other institutions made the loans.
Step 1: Skim over the Case Write-ups
Because the case was such a dramatic failure, a number of case studies have been written on the case. For background, I have attached three case studies written on the case (one from Harvard, one from Northwestern and one from Thunderbird) as well as financial documents published by the company. You do not have to read everything in detail, but just skim through the readings three cases to get a general idea what the case is about (I think it is easy reading).
Step 2: Mechanical Modelling Issues
I have used data from the case studies and actual financial statements to create a “base case” financial model in the attached file name “Iridium Case Study Exercise.” In preparing the case, the first step (after reviewing the three readings) is to fill in the blanks for various items in the model. The idea behind doing this is so that you understand the mechanics of the model and see some of the complications of a more
Iridium is a famous case in which Motorola and other well known companies invested about $5 billion in a satellite venture that would enable a person to use his cell phone around the world. The investment included more than $2.2 billion in debt. Soon after operations began, the company declared bankruptcy and its assets were ultimately sold for only $25 million, leaving the lenders with a total loss. It is obvious that projections made by the company and endorsed by the most prestigious banks on Wall Street were comical leading to massive losses for banks, debt investors and equity investors. It is also clear that the company made some mistakes in marketing such as not having sufficient phones available after a major advertising campaign. The questions I would like you to address in this case are what was underneath the crazy assumptions and financial projections made by these highly respected financial institutions and how could the banks and other institutions made the loans.
Step 1: Skim over the Case Write-ups
Because the case was such a dramatic failure, a number of case studies have been written on the case. For background, I have attached three case studies written on the case (one from Harvard, one from Northwestern and one from Thunderbird) as well as financial documents published by the company. You do not have to read everything in detail, but just skim through the readings three cases to get a general idea what the case is about (I think it is easy reading).
Step 2: Mechanical Modelling Issues
I have used data from the case studies and actual financial statements to create a “base case” financial model in the attached file name “Iridium Case Study Exercise.” In preparing the case, the first step (after reviewing the three readings) is to fill in the blanks for various items in the model. The idea behind doing this is so that you understand the mechanics of the model and see some of the complications of a more