Motorola Avoids $4 Billion Payout in Iridium Case
Posted on: Wednesday, 21 May 2008, 15:00 CDT
Motorola, which was on the hook for $4 billion in claims stemming from the bankruptcy of the Iridium satellite system, will pay nothing under a settlement approved by a federal judge, the company said Tuesday.
Bankruptcy Court Judge James M. Peck approved a settlement that was negotiated in February by Motorola and a committee of Iridium creditors, the company said.
Iridium, a satellite telephone system that allowed users to talk to and from anywhere in the world, was designed and built at Motorola's Satellite Communications division in Chandler in the 1990s. But the system never attracted enough subscribers, and the Iridium operating company was forced to file for bankruptcy protection in 1999.
The agreement announced Tuesday settles the last of the claims arising from that bankruptcy case, said Ann Sidrys, Motorola's trial attorney.
"This is a favorable outcome for Motorola," said Peter Lawson, executive vice president and chief counsel for Motorola. "We have always been confident in our litigation position, and this resolution -- ending the entire case at no out-ofpocket cost to Motorola -- confirms our confidence was wellfounded."
Creditors in the case -- financial institutions and bondholders -- accused Motorola of breach of contract, fraudulent conveyance and other charges and sought more than $4 billion in total damages.
Peck made a favorable ruling to Motorola in a firstphase trial held in New York last August, which dealt with a portion of the claims. Rather than proceed to an expensive second trial on the remaining claims, the parties conducted settlement discussions, which resulted in the final agreement announced Tuesday.
Tuesday's decision brings a probable end to Motorola's involvement in a disastrous enterprise once ballyhooed as the future of telephones. The Iridium concept required launching a constellation of 66 satellites in low-earth orbit to provide complete communications coverage of the globe including oceans, airways and polar regions. Subscribers use handsets that communicate directing with an overhead satellite, and the signal is relayed from satellite to satellite until it reaches another subscriber with an Iridium telephone or a ground station from which it is tied to the terrestrial phone network. The result is that users even in remote locations can talk directly with anyone, anywhere.
Motorola envisioned a major market for workers in remote locations where land line and mobile-phone networks weren't developed. But the system was too expensive and couldn't compete as cell-phone coverage expanded.
Source: The Tribune
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