Jul 26, 2002 : The webhost industry: week review
📅 - Unmistakably the biggest news this week, and a truly significant event in the history of business and investment for that matter, was the weekend submission of the largest bankruptcy filing in history, made by telecommunications giant WorldCom. The impact of the announcement sent ripples through the communications business, stirring up even the furthest corners of the industry.
The company filed its petition for protection under Chapter 11 of the US Bankruptcy Code on Sunday, surprising very few after struggling in the wake of am almost $4 billion accounting scandal, and under the weight of an enormous debt.
"We will use this time under reorganization to regain our financial health and focus, while operating with the highest integrity. We will emerge from Chapter 11 as quickly as possible and with our competitive spirit intact," Said president and CEO John Sidgmore, predicting that the company would emerge from Chapter 11 between 9 and 12 months from now.
The company had already secured up to $2 billion worth of Debtor-in-Possession funding backed by Citigroup Inc., J.P. Morgan Chase & Co. and General Electric Co.'s GE Capital financing arm. The funding, combined with almost $2 billion in Chapter 11 savings on interest payments, says WorldCom, will enable the company to continue paying employees and maintain operations during the bankruptcy.
One such operation is Web hosting company Digex Incorporated, in which WorldCom holds a 94 percent stake. Prompted by the bankruptcy, Digex released a statement early in the week, emphasizing that it is a separate public company and was not included in WorldCom's bankruptcy filing. However, Digex is, and will continue to be, funded by WorldCom, and will continue to use its network service, the company said.
Later in the week, Digex released a preview of its second quarter earnings results. The company reported growth in its customer base, despite declining revenues. Cash borrowing and capital expenditures were both down considerably from previous quarters, as the company worked to achieve self sufficience.
?Our executive team is very focused on moving Digex forward to a state of financial independence,? said CEO George Kerns, in a statement.
Also following the bankruptcy announcement, competing carrier NTT/Verio made an announcement of its own. The company said it had launched the NTT/Verio transition program, designed to assist in the migration of service for companies that have reason to doubt the financial stability of their Internet backbone providers.
But, while WorldCom's bankruptcy filing had a serious impact on a number of things, one thing the filing is unlikely to impact, say experts, is Internet performance. Government and finance obviously have a significant interest in the continued operation of WorldCom's UUNet backbone, which carries fully half of the world's Internet traffic. If the company's reorganization efforts are unsuccessful, assets would likely be sold, or the government would step in to ensure the network's continued operation.
WorldCom's situation, they say, is significantly different from that of European carrier KPNQwest, which began shutting down parts of its network after filing for bankruptcy in May.
Early this week, it was reported that KPNQwest is still in talks to sell of the remaining portions of its network, which had been left running without monitoring or maintenance since workers walked out last Friday. The talks are reportedly centered on KPN, which owns 40 percent of the bankrupt company. Nordic telco Telia, which has already purchased parts of KPNQwest, is also said to be interested. But the company has said there is not a competition between the two, and talks with Telia are not active negotiations.
The scandal and struggles at WorldCom, and the resounding failure of KPNQwest, are a big part of a period of serious instability in the telecommunications business. The instability has drawn a range of reactions from other telcos that spread across the spectrum from cautious checks to displays of confidence, even to outright plays for dominance in the sector.
Local telephone carrier Verizon announced on Thursday that it would not re-integrate the less-than-profitable communications company Genuity it was forced to spin off during the merger of Bell Atlantic Corp. and GTE Corp. Verizon chose to convert its stake into just under 10 percent of Genuity's capital stock, foregoing its right to convert to a controlling 80 percent interest.
Genuity said it was surprised by the decision, and that it was in talks with both Verizon and creditors to determine the impact it would have on Genuity's business. The company had already begun collecting the remainder of a $2 billion line of credit.
Major communications carrier Cable & Wireless made a confident move to round out its business on Thursday,
The company filed its petition for protection under Chapter 11 of the US Bankruptcy Code on Sunday, surprising very few after struggling in the wake of am almost $4 billion accounting scandal, and under the weight of an enormous debt.
"We will use this time under reorganization to regain our financial health and focus, while operating with the highest integrity. We will emerge from Chapter 11 as quickly as possible and with our competitive spirit intact," Said president and CEO John Sidgmore, predicting that the company would emerge from Chapter 11 between 9 and 12 months from now.
The company had already secured up to $2 billion worth of Debtor-in-Possession funding backed by Citigroup Inc., J.P. Morgan Chase & Co. and General Electric Co.'s GE Capital financing arm. The funding, combined with almost $2 billion in Chapter 11 savings on interest payments, says WorldCom, will enable the company to continue paying employees and maintain operations during the bankruptcy.
One such operation is Web hosting company Digex Incorporated, in which WorldCom holds a 94 percent stake. Prompted by the bankruptcy, Digex released a statement early in the week, emphasizing that it is a separate public company and was not included in WorldCom's bankruptcy filing. However, Digex is, and will continue to be, funded by WorldCom, and will continue to use its network service, the company said.
Later in the week, Digex released a preview of its second quarter earnings results. The company reported growth in its customer base, despite declining revenues. Cash borrowing and capital expenditures were both down considerably from previous quarters, as the company worked to achieve self sufficience.
?Our executive team is very focused on moving Digex forward to a state of financial independence,? said CEO George Kerns, in a statement.
Also following the bankruptcy announcement, competing carrier NTT/Verio made an announcement of its own. The company said it had launched the NTT/Verio transition program, designed to assist in the migration of service for companies that have reason to doubt the financial stability of their Internet backbone providers.
But, while WorldCom's bankruptcy filing had a serious impact on a number of things, one thing the filing is unlikely to impact, say experts, is Internet performance. Government and finance obviously have a significant interest in the continued operation of WorldCom's UUNet backbone, which carries fully half of the world's Internet traffic. If the company's reorganization efforts are unsuccessful, assets would likely be sold, or the government would step in to ensure the network's continued operation.
WorldCom's situation, they say, is significantly different from that of European carrier KPNQwest, which began shutting down parts of its network after filing for bankruptcy in May.
Early this week, it was reported that KPNQwest is still in talks to sell of the remaining portions of its network, which had been left running without monitoring or maintenance since workers walked out last Friday. The talks are reportedly centered on KPN, which owns 40 percent of the bankrupt company. Nordic telco Telia, which has already purchased parts of KPNQwest, is also said to be interested. But the company has said there is not a competition between the two, and talks with Telia are not active negotiations.
The scandal and struggles at WorldCom, and the resounding failure of KPNQwest, are a big part of a period of serious instability in the telecommunications business. The instability has drawn a range of reactions from other telcos that spread across the spectrum from cautious checks to displays of confidence, even to outright plays for dominance in the sector.
Local telephone carrier Verizon announced on Thursday that it would not re-integrate the less-than-profitable communications company Genuity it was forced to spin off during the merger of Bell Atlantic Corp. and GTE Corp. Verizon chose to convert its stake into just under 10 percent of Genuity's capital stock, foregoing its right to convert to a controlling 80 percent interest.
Genuity said it was surprised by the decision, and that it was in talks with both Verizon and creditors to determine the impact it would have on Genuity's business. The company had already begun collecting the remainder of a $2 billion line of credit.
Major communications carrier Cable & Wireless made a confident move to round out its business on Thursday,
Reads: 1950 | Category: General | Source: TheWHIR : Web Host Industry Reviews
URL source: http://www.thewhir.com/marketwatch/wrap072602.cfm
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