To Al Gore, this was a milestone in the nation's continuum of innovation. In a Rose Garden ceremony last October, the administration's techie-in-chief placed the first call on a mobile phone system called Iridium, a celebrated project that let users communicate from anywhere on the globe through a network of 66 satellites orbiting 421 miles above the earth.
"These . . . systems complete the telephone coverage of the earth's surface that Alexander Graham Bell began more than a century ago," the vice president told Gilbert M. Grosvenor, Bell's great-grandson and the recipient of the ceremonial call. "Your great-grandfather would be very proud."
But 10 months later, with plans afoot to display the prototype of an Iridium satellite in the Smithsonian, the District-based company finds itself galaxies removed from its giddy launch day. Iridium has spiraled earthward with startling speed, a dazzling triumph of innovation flipped into a heap of corporate space junk.
Last week, Iridium LLC filed for Chapter 11 bankruptcy protection after it missed a series of payment deadlines on $1.5 billion in bank loans and another $1.5 billion in bonds. It is celebrated now as one of the highest-profile failures in a realm of technology marked by success stories, a case study of the disjunction between cold-eyed market forces and heady technology.
Iridium is just one glaring example of the pioneer confounded by the riddles of supply and demand. "There is a constant pitter-patter of little companies that focus too much on technology and not on marketing," said Carl Pitasi, a former director of marketing at Motorola Inc., the telecommunications powerhouse that initiated the Iridium project more than a decade ago and that still owns 18 percent of the company.
Pitasi, who now runs an information technology consultancy in Reston, said that brilliant technical achievements can breed a dangerous hubris. Innovators can believe that expertise in one area translates seamlessly to skill in another, he said. And this can prove fatal to a business such as Iridium, especially in a high-tech world where market forces zig-zag unforgivingly.
"When you're undertaking a complex high-tech project that will take five or six years, you can pretty much predict failure," said Michael Cusumano, a professor at MIT's Sloan School of Management and author of "Competing on Internet Time." "No one can think that far ahead. All kinds of better, cheaper innovations can appear."
This is the reality that set Iridium's downward spiral in motion. In 1987, when Iridium's vision of worldwide mobile phone service was first conceived, few could foresee today's widespread use of cellular phones.
Bary Bertiger, a Motorola engineer, imagined a boon for globe-trotting business travelers by letting them converse through a network of 77 low-earth-orbiting satellites (the number was later scaled back to 66). The notion seduced an elite team of collaborators and investors.
"They thought they had something stupendous," said Alan Marcus, director of the Center for the Historical Studies of Technology and Science at Iowa State University. "They thought they could be like a mobile AT&T for the entire world." In 1991, Motorola formally incorporated Iridium, named after the element with the atomic number 77.
By the early 1990s, however, the wireless telephone industry was taking dramatic, unforeseen turns. Cellular service, far less expensive because it deployed earthbound transmitters and antennas, was taking hold among Iridium's target customers -- business travelers.
Unlike Iridium phones, cellular phones could work from inside buildings. Unlike Iridium's phones, cellular phones did not require open sky overhead. Cell phones also were much cheaper: Shortly after the Iridium service was introduced last year, the handsets cost $3,000 apiece and international calls cost up to $7 a minute.
This was prohibitive to most customers, and left Iridium to scramble somewhat laughably for customers in remote markets with no cellular service -- explorers in the Arctic, for example, as well as oil rig workers on far-off seas and trekkers in canyons.
A $100 million global marketing campaign did little to move Iridium beyond its finite niches.
Customers were scarce from the outset. Iridium has about 20,000 today, nowhere near the 100,000 it expected to have by the end of last year -- and light-years from the half-million it said it would need to break even. Chief executive Edward Staiano was forced to resign in April. "These are tough times," understated his successor, John Richardson, on the day of the bankruptcy filing. Richardson was traveling overseas and was not available for a comment yesterday.
Iridium has vowed to keep the project running, restructure debts and soldier forward. While supportive, Motorola has made no commitment to add to the $1.66 billion it has already sunk into the venture. In sum, Iridium has borrowed an estimated $3 billion to build the network; this compares with the mere $1.45 million it reported in annual revenue in the past fiscal year. Even if Iridium can settle its debts, many wireless analysts doubt the company could assemble enough niche markets to sustain a business.
Industry-watchers are pointing to Iridium as a defining failure of the times, an Edsel for the tech-happy 1990s.
"One of the features of [pioneering] developers is that they get their self-worth all tangled up in their technologies," Pitasi said. It can blind innovators to market shifts, he said, especially in a time when so much investor cash is available to keep them going.
"Things like this happen on a much smaller scale than Iridium all the time," said Edson de Castro, a founder of Data General Corp., the computing icon whose creation of the once-dominant "mini-computer" in the 1970s was chronicled in the Tracy Kidder book, "The Soul of a New Machine." DeCastro, whose company was crippled by the advent of personal computers in the 1980s, sees no parallel between Data General's downfall and Iridium's.
While both companies embarked on ambitious pursuits, Iridium tried to launch an elaborate service all at once, with no intermediate checkpoints. "It's a prescription for failure to undertake something like that and expect to succeed all of a sudden," de Castro said. Iridium, he said, should have offered a much more limited service early on, both to test its technical viability and to gauge market reaction. "These markets are unknowable, and the only way to learn about them is to put stuff out there in incremental steps," he said.
Notwithstanding the resulting mess, some say Iridium will long be respected -- and remembered -- as a technological triumph, albeit a business failure. "To launch and manage a vast satellite network is a tremendous achievement," said Bennett Kobb, a wireless industry analyst in Arlington.
Likewise, failure is considered a kind of badge of honor in high-tech circles. Great firms fail all the time, Cusumano said, and they sink vast amounts of cash into technologies that are never adopted. Early this century, for example, companies invested huge resources into things such as electric and steam-driven cars.
And today, the number of technology companies that go public is a tiny fraction of those that disintegrate. "No Fear to Fail" is a Silicon Valley mantra.
But de Castro posits a corollary maxim that applies, unfortunately, to Iridium.
"If you're gonna fail, fail fast and fail early," he said. "Don't go through 10 years and billions of dollars before you realize you're failing. That's when things can turn really bad."