CIDERA SEEKS TO REDEFINE SATELLITE INTERNET BUSINESS
Cidera quietly became latest satellite company to admit plans of big profits in Internet business were being tempered with “coolness” of capital markets and need to grow at slower pace. Those factors coupled with rapid development of fiber networks expanding into remote areas and lagging demand for satellite Internet services have hurt company, industry sources said. Seeking to streamline operations and get clear focus on future, Cidera rewrote business plan despite raising $75 million from private investors last month and brought back former CEO Douglas Humphrey to replace Richard Hanna, who became “victim of the dot- com plague,” a source said. Cidera cut staff 1/3 with layoff of 100 workers, including 5 members of senior management. While company has been close-mouthed about plans, it has indicated it will use its satellite network to concentrate more on niche business customers rather than broader Internet.
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New plans call for Cidera to concentrate efforts on global business market and developing exit strategy by positioning itself in market for takeover by major telecom company looking to bundle broadband services, source said. It wants to provide high-speed delivery of internal communications services and in-house training while developing new technology for advanced broadband services. Satellite consultant Leslie Taylor told us she wasn’t totally surprised about problems of Cidera and other satellite Internet companies. “It’s a timing thing,” she said: “My take on it is not that these aren’t useful services that are being provided, but it takes longer to develop the business. The market is impatient.” She also believed satellite Internet companies were going to have to do better job of defining their business models. “Who is going to pay for what and why?” she asked. “The last mile is a niche.”
Analysts believe Cidera will have tough time accomplishing that goal because, as one industry source said, “it’s very competitive market,” with iBeam, Loral Cyberstar and PanAmSat Net36 targeting corporate customers. Com Ventures, venture capital firm that invests exclusively in communication technologies, said only 10% of broadband market needed satellites for service. DSL users account for 50%, cable modems 25% and fixed wireless technology 15%. That doesn’t leave room for large number of satellite Internet companies, Com Ventures spokesman said. “All of these companies have the same problem,” satellite analyst said: “This is a niche market that is still developing.” When idea for Cidera was conceived, company staked its success on belief that growing number of Internet Service Providers (ISPs) would need its services to deliver content to edge of Internet, industry official said. “A lot of people thought there would be this great demand for streaming media and other broadband services, but things just haven’t worked out that way,” he said: “The process of developing the idea has moved very slowly.”