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I would argue that 25% or so net margin for a decade is a pretty significant sign considering how small their customer base must be and how much expenses they m
by Mo3 4y ago
I would argue that 25% or so net margin for a decade is a pretty significant sign considering how small their customer base must be and how much expenses they must have.
But yes, I did in fact assume it to be higher.
- lotsofpulp 4y agoI see a lot of volatility for Iridium with quite a few years with big losses and zero profit. Viasat simply has near zero profit margins, and quite a few years with losses. Inmarsat looks like it has 20% or so profit margin for the last few years, but I could not quickly find more years of data. Also, I would expect decent (10%+) profit margins for a business with few customers and extremely costly barriers to entry. Both of those factors add to volatility, and investors would require a commensurate return to make it worth investing in.
- Mo3 4y agoIridium apparently had much more expenses for a few years around 2018, possibly mass upgrading their infrastructure, but before that a decade of near constant 20-30% net, recovering again now, unless I'm misreading this data.
- lotsofpulp 4y agoThe Mar 31, 2022 datapoint is -0.21%. They do make a good profit in the years they do, but my point is they also have quite a bit of volatility. I would not touch that business without the 10%+ profit margin opportunities.
- Mo3 4y agoDefinitely agree, I probably wouldn't touch them at this point any more at all. Was just replying to the notion that this couldn't be artificial highway robbery just because their net margin isn't great. I believe it definitely still can be, because apparently the only way these companies are even in business right now is exactly by highway robbery.
- lotsofpulp 4y agoI cannot agree with that characterization. How can a business be a suboptimal or undesirable investment because it does not earn enough profit relative to risk, and simultaneously be committing highway robbery (i.e. charging too high a price for its products/services)? If anything, it seems like the customers should feel lucky the investors are risking their money on this product/service, and it is being offered at all.
- Mo3 4y agoI think there's a misunderstanding. I noted that I wouldn't see these businesses as a good investment any more because of SpaceX and further developments. I believe they can still commit highway robbery even without their net margins being dramatically high, since highway robbery is exactly what you stated - charging too high a price for its products/services.
- lxgr 4y agoCharging "too high a price" is only possible in a monopoly position. Would you argue that any satellite provider has one, at the moment? For high-bandwidth large-terminal, you have Inmarsat GX, Viasat and various other Ka and Ku band based providers; for safety of life you have Inmarsat and Iridium (except at the poles, where it's Iridium and HF); for land-based tracking, you have Globalstar and Iridium; for handheld telephony, you have Iridium, Inmarsat and Globalstar. Notably, Starlink also does not look like it will be competing in any of these fields.
- walrus01 4y ago> Iridium (except at the poles, where it's Iridium and HF) a note that part of the DoD iridium market where Iridium was previously the only ultra-high-latitude/polar coverage part is served by the DoD's own molniya orbit satellites which provide full polar coverage. the orbits of these are designed to be at apogee and long dwell time directly above high latitudes. the DoD is still a big part of iridium's revenue stream in general of course.