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Enron Mail |
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Jan & Mike,
Following article highlights some of the troubles DSL providers are having in the US. Covad Communications Inc. - A Cautionary Tale Covad Communications Inc. prides itself in being a high-speed Internet services company . On 2nd January 2001 nearly 15% of Covad's staff woke up to a holiday season present they didn't expect, as the California-based DSL provider announced a further round of 400 redundancies to cut costs. Not only has Covad served notice on 400 employees in the first week of 2001, but it had already fired another 400 employees on 27 November 2000 after restating third-quarter results for last year which revealed a wider net loss than originally reported. Covad's shares lost about 95% of their value during 2000, but the firm is now hopeful that the redundancies - primarily in direct sales and marketing - coupled with the closing of 200 DSL central offices and consolidating space will provide improvement. Covad shares were worth about US$65 during March 2000, but are currently valued at just US$1.65 (at the time of this writing). On 12 December 2000, Covad Communications Inc. announced that it expected its fourth quarter and year 2001 revenues to miss Wall Street expectations and also expected EBITDA-basis losses for the periods. This news came only weeks after Corvad had restated lower its already-released third quarter results because of delinquent payments from business partners. Forward looking into the year 2001, Covad expects to report an EBITDA-basis loss of $450-$470 million, with revenue likely to come in at $380-$390 million. These gloomy outlook changes come just as other companies that install high-speed Internet connections over regular telephone lines - using DSL - have been cutting staff and warning of disappointing subscriber and revenue growth. Corvad are hoping that by cutting the workforce, it should slow the burn rate, which had been running at about $70 million per month, partly as a consequence of trying to expand its network. Corvad is a company that grew at a time when capital was freely available, but it has all but shut itself out now from telecom service providers and plans to start offering self-installation DSL packages for individual subscribers in the first quarter of 2001 (D.I.Y. DSL in a Jiffy Bag).. Corvad is Not Alone Other US companies caught in the same troubled waters include DSL.net Inc. and NorthPoint Communications Group Inc., whose financial condition has led No. 1 U.S. local phone company Verizon Communications to cancel its planned $800 million agreement to buy NorthPoint. Covad has also said that 14 of its Internet Service Provider partners, which sell DSL directly to consumers, are "troubled" and four of them have filed for bankruptcy protection. On the back of this grim news, Covad announced a program for its DSL customers that would allow them to switch from these troubled ISPs to others with no fee. Corvad, NorthPoint Communications Inc. and DSL.net are not alone in these troubled times. Many independent providers of digital subscriber line, or DSL, Internet service, which offer high-speed data transmission and Web access over existing copper telephone lines, have faced increasing difficulty tapping the capital and equity markets to fund operations as they strive for profitability. Efforts to achieve profitability have been hurt by consistent disappointments about subscriber and revenue growth across the sector.
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