Iridium Communications (NASDAQ:IRDM) shares are down around 1% premarket Friday after the company said Qualcomm (NASDAQ:QCOM) has told the company it will terminate previous agreements they held.
Iridium had previously announced agreements with Qualcomm to enable satellite messaging and emergency services in smartphones powered by Snapdragon Mobile Platforms via Iridium’s network.
While the company said they successfully developed and demonstrated the technology, smartphone manufacturers didn’t include the technology in their devices.
As a result, Qualcomm told IRDM on November 3 that it has decided to terminate the agreements, effective December 3, 2023. The company confirmed that the termination doesn’t impact its financial guidance for full-year 2023, and it continues to expect to generate about $1 billion in annual service revenue by 2030, as well as having the capacity to generate approximately $3 billion in shareholder returns through 2030.
“While I’m disappointed that this partnership didn’t bear immediate fruit, we believe the direction of the industry is clear toward increased satellite connectivity in consumer devices,” said Iridium CEO Matt Desch.
Reacting to the news, analysts at Morgan Stanley said in a note that satellite direct-to-device opportunities have been part of its bull case on Iridium, and the news confirms the “more cautious recent commentary from the company that it would take some time for the opportunity to become material.”
“Importantly, the company has not included any significant impact from this deal in their near or longer-term guidance,” the analysts noted. “In addition, the stock has de-rated in recent months, in part due to lack of progress on this front, including no incremental news at the recent investor day, so this may already be priced into some degree and Iridium also has an active buyback program in place.”
Morgan Stanley, which has an Overweight rating and $72 price target on IRDM, believes that over time, Android smartphone manufacturers and service providers will be keen to offer D2D satellite services, in part due to Apple (NASDAQ:AAPL)’s Emergency SOS offerings, which were introduced last year. However, they also state there are several competing D2D platforms emerging.
