At the end of March, Iridium had a little over 10,000 customers. Iridium's business model uses a great deal of leverage, both operational and financial. The operational leverage comes in the form of having an extremely high fixed cost and a low variable cost for the service. In other words, the fixed cost of running and maintaining the satellite system is obviously quite lofty while the cost of adding a paying customer to the system is fairly low. While the model works well if there is a sufficient amount of business, the result is also quite ugly if demand is overestimated.
Operational leverage is always an important risk factor to think about.
Watching the company's top brass jump ship should have been an additional warning sign that perhaps the ship was sinking. Even if that wasn't enough of a wakeup call, the first quarter earnings should have alerted investors that trouble was ahead. Iridium is also an excellent example of a company with a complicated corporate structure, something to be wary of. It may be difficult to imagine Iridium falling any further after watching it trade at nearly a tenth of the value it did a year ago, yet it appears that the real trouble for Iridium is just beginning. Unless the company can magically increase demand for its service and sign up a boatload of subscribers, there is little hope for profitability under the current operational model.