While the company was reluctant to quantify the impact of the CAT deal, it is clear that this is a tipping point for the stock. Essentially every piece of equipment coming out of Caterpillar will now have an Iridium receiver already installed. So if you are Bechtel and your new CAT equipment has iridium monitoring capability, they will probably want their old CAT equipment to also have the same capability. Given that they now have an arrangement with CAT, it wouldn't surprise me to hear about similar deals with PCAR, DE, International Harvester, and other producers of high-value equipment that is virtually always outdoors (where satellite service is superior to terrestrial service). It is almost laughable to think that they have less than 300,000 M2M subscriptions when there are literally tens of millions of individual assets that could be M2M connected. Short at your own peril!
SPACENEWS May. 14, 2013: Orbcomm Blasts Iridium’s ”Confusing and Optimistic” Caterpillar Claims
Satellite machine-to-machine (M2M) services and hardware provider Orbcomm has come out swinging at competitor Iridium’s claims that Iridium has locked up most of heavy-equipment builder Caterpillar’s future satellite M2M business, spiriting away a major Orbcomm customer.
In occasionally blistering remarks delivered during a conference call with investors, Orbcomm Chief Executive Marc J. Eisenberg said the Iridium claims were “confusing and optimistic.”
McLean, Va.-based Iridium Communications announced May 2 that it had won a “large, multi-year agreement” with Caterpillar that Iridium Chief Executive Matthew J. Desch said “establishes us as their primary provider of satellite M2M services.”
Desch said the Caterpillar (CAT) deal is “a watershed” event in Iridium’s M2M business.
Eisenberg did not wait for investor questions to attack the issue during Orbcomm’s May 9 investor conference call.
“For the immediate future, CAT has tens of thousands of Orbcomm hardware [units] in backlog and tens of thousands more still being manufactured. This represents over two years’ worth of future deployments,” Eisenberg said. “Over the next two years, we do not anticipate any material change to our CAT business. [W]e are not aware CAT has made any decision to transition away from Orbcomm on the product lines we serve in the near future.”
Eisenberg conceded that, as a customer forced to make decisions among suppliers that need to launch new satellite constellations — this is the case for both Orbcomm and Iridium — Caterpillar logically would seek “to hedge their bets.” But he said he is not aware of any competition for Orbcomm-compatible business that Rochelle Park, N.J.-based Orbcomm has lost or that Iridium has won.
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As to Caterpillar’s long-term plans, he said, “I don’t think anyone knows. I don’t think Iridium knows. I listened to [Iridium’s] earnings [call] and their conversation, and I’ve got to tell you it was confusing and optimistic.
“I mean some of the words they used. I’ve known CAT for 12-15 years and they don’t do things like guaranteed contracts. So when someone says they have a large contract, I don’t know what a large contract means. Does it mean a contract with a large customer? I didn’t see an 8K [a required stock-market advisory], did you? Does it mean [the contract] was done on a poster board? Is that a large contract? Does it mean a large guy? I am not quite sure.
“What is a primary provider? CAT doesn’t sign you to be a primary provider, they sign you to have the ability to sell your product, and that’s it.
“Watershed agreement? I don’t even know what a watershed agreement is. So I think they are overly optimistic and they are confusing the market. I understand the pressure they are under. Their business has been contracting for many quarters now.”
Eisenberg said it is possible that Iridium won a Caterpillar contract to provide a high-usage network that was more than Orbcomm could provide, but which concerned no more than several thousand units. “It’s not a particularly big contract. We were a no-bid on that and I am guessing that is probably one of the wins at our competitor.”
The importance of Caterpillar to Orbcomm is clear in the company's May 10 filing to the U.S. Securities and Exchange Commission. For the three months ending March 31, Caterpillar accounted for 25.4 percent of Orbcomm's total revenue, compared to 18.5 percent a year ago.
Orbcomm said 33.6 percent of its accounts receivable as of March 31 were with Caterpillar.
Get serious. Iridium can only get business by offering it for deep discounts as they have big holes in coverage and low power satelites. ORbcom's launch this summer will set the standard for high power birds and Iridium will lose customers. If you do not have high power birds, you will lose market share. This is a fast growing industry but I doubt IRD can keep up.
Nothing you said makes any sense. Iridium's coverage is indisputable. Your comment about "low-power" also makes little sense especially when you are talking about the M2M market. Who knows maybe you are confusing low orbit with low-power! But most importantly, when a company like Caterpillar spends months (if not close to a year) analyzing a technology to partner with they are effectively putting a seal of approval when they choose you. If you think Caterpillar is going to choose IRDM today and switch to Orbcom tomorrow your "analysis" is flawed big time!
Sentiment: Strong Buy
I'm new to this board and the stock.I bought in a few weeks ago a $6.19.I don't quite understand all the pessimism about this company.They are profitable and they are growing their subscriber base.This deal does seem to have a bright future as does their new aircraft tracking system.I do understand the risks involved with the launching of the new satellites.This should easily be a $10-$12 stock right now.I'm in this for the long haul.I'm not a trader,I'm an investor,and as an investor you grow with the company.You accept the ups and downs,the crowning acheivements and the agony of bad decisions or implementation.I do not short stocks.I've never shorted a stock.
Good for you getting in low. Good luck to ya. I just got out. Here are some reason's I got out:
1) PE reached my ceiling.
2) Revenue decreased, even on higher subscribers, It show's short-term weekness which for a small cap high growth company just doesn't have a place in my portfolio.
3) Solar Maximum coming into play. What if a solar flare takes out a satelite (or 2).
4) Shorts are eating up IRDM. They're keeping the PPS down so I know it won't get away from me. I can always get back in without much change to PPS.
5) I really really really like the Aerion technology. But why did they join into a Partnership with Nav Canada? Why not just own it outright and sell the usage. Will they continue to sell the partnership? It kind of says something about they're ability for future growth.
6) The $7 warrants will keep this down.
7) Finally, I too was excited about the CAT deal. But only because it drove up the PPS. I don't think it'll be as big as everyone says. Just do a little research into ORBC's current deal with CAT. Additionally, CAT is signing new deals with everyone in order to diversify their infrastructure. Look up the recent deals CAT has signed. CalAmp for instance.