Please ensure Javascript is enabled for purposes of website accessibility

Internet-Connected Construction Equipment? Iridium Communications Says "Yes"

By Nicholas Rossolillo - Oct 16, 2017 at 9:37PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The communications company is beginning to roll out services using its new satellite constellation, and it thinks construction equipment can benefit.

It's been a busy year for Iridium Communications (IRDM 1.54%). The company has been sending its next-generation satellite constellation into orbit, and the fruits of that labor are beginning to be realized. Here's what investors need to know.

New satellites -- why?

Iridium is building 81 satellites -- dubbed NEXT satellites -- that will provide new services and capabilities for customers. Of the total, 66 will operate in-orbit, 15 will serve as in-orbit spares, and six will be held back as ground spares.

SpaceX has been hired to launch the satellites in eight batches. The first two were dispatched earlier this year, and the next six lift-offs will be complete by the end of 2018.

A man in an orange jumpsuit and hardhat at a launch site.

Image source: Iridium.

The new satellites will power new and improved communications services for companies and government organizations that require globe-spanning service. NEXT will enable broadband speeds for data services, Internet of Things (IoT) applications like asset tracking, and next-generation air traffic surveillance systems.

Though it will take all 66 operational satellites to provide 100% coverage of the globe, Iridium recently announced that it had begun testing its new Certus communications service on the satellites that have thus far been put into operation. Once fully deployed, Certus will provide data speeds up to 1.4 Mbps, which is enough speed for high-definition video streaming.

Early signs of new business

While it is still too soon to tell how the new constellation will ultimately affect Iridium's business, the company has reported some early wins. It was announced on Sept. 27, that Iridium has signed a long-term deal with Hitachi Construction Machinery (HTCMF) to provide global coverage for Hitachi's e-service machinery management system. By tapping into Iridium's network, the expanded service will now bring internet connections to owners of Hitachi equipment anywhere on the globe.

Hitachi's now global e-service management system provides equipment customers with information like CO2 emissions, equipment idling times, and fuel consumption. Equipment operating information can be helpful in managing crews, scheduling preventative maintenance, and tracking equipment locations. Adding Iridium into the mix opens up those capabilities for contractors and organizations that do work in remote and hard-to-reach areas.

An orange Hitachi excavator and hauler working in a remote mining operation.

Hitachi builds heavy equipment for construction, mining, and other related services. Image source: Hitachi.

More important for Iridium, adding Hitachi into its fold helps the company expand its IoT services. During the second quarter that ended on June 30, commercial machine-to-machine (M2M) subscribers increased 20% to 461,000. Government M2M subscribers were up 19% to over 44,000. Actual M2M revenue is up only 15%, though, as the average revenue customer is down.

What it means for investors

On the back of those new services, the company thinks that total revenue can rise by about 30% by 2019. In the interim, though, 2017 service revenues are expected to be up 3% to 5%. Year-to-date, the company is on track to hit those numbers with service revenue sitting at up 3.1%.

There is a lot riding on the launch of Iridium's NEXT constellation, and growth will likely remain modest until enough satellites are deployed to enable next-gen services. However, the signing of a potentially big client in Hitachi ahead of those new services is a positive sign. Iridium management sees satellite-based IoT growth starting with better solutions first, and demand following.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Iridium Communications Inc. Stock Quote
Iridium Communications Inc.
$38.14 (1.54%) $0.58

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 07/02/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.