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Thursday, July 25, 2002 |
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• Time Warner Cable
puts Denver pullout • Verizon opts not to integrate Genuity • Burke tapped to lead combined AT&T Comcast • Aurora Networks doubles its funding • Adelphia files suit, Rigas family makes bail • Collette gets CEO slot at Ucentric • Increase in cable rates far outpaces inflation Time Warner Cable puts Denver
pullout Denver, once considered the cable capital of the world, will continue to lose its grip on that mantle later this year when Time Warner Cable relocates most of its corporate offices there to Charlotte, N.C. and Herndon, Va. Time Warner Cable spokesman Mark Harrad confirmed Monday that about 200 of the company’s 300 employees based in the Denver area will be affected, with the majority of those job functions moving to Charlotte, home to one of the MSO’s 39 divisions. Some engineering functions, including a portion of Time Warner Cable’s network engineering unit, will be moved to Herndon, Va., where the company’s Road Runner division is based, Harrad said, but was not more specific. Time Warner Cable hopes to complete the relocation by the end of 2002, Harrad said. The MSO, however, is not moving all of its Denver operations. The MSO’s National Division, a 100-person unit that oversees the operation of smaller, non-clustered cable systems, will stay in the area, Harrad said. He added that Time Warner Cable is making the move to help the company establish a stronger connection with the MSO’s corporate and divisional operations, realize cost efficiencies and to take advantage of some corporate services tied to existing Time Warner Cable operating systems. Time Warner Cable presently does not own or operate any cable systems in the Denver area. Still, the move will further erode Denver’s already dwindling base of cable companies and organizations. Following the Time Warner Cable pullout and the expected completion of the AT&T Broadband-Comcast Corp. merger later this year, Denver’s cable ties largely will be limited to Liberty Media, The Cable Center and CableLabs, an industry-wide R&D organization located in Louisville, Colo. - Jeff Baumgartner
Verizon opts not to integrate Genuity After careful review, Verizon Communications Inc. has decided not to exercise its right to buy back a controlling stake in data network operator Genuity Inc. Verizon said it would not convert a 10 percent stake in Genuity into an 80 percent position, citing market conditions and Verizon's business needs. The decision caused a default under Genuity's credit facility with Verizon and its credit facility consortium banks. Following Verizon's decision, Genuity stock was pummeled, falling to a new 52-week low. As of 12:25 p.m. EDT, the company's shares had fallen more than 71 percent to 74 cents. "Verizon's decision to cancel its option to integrate Genuity and its credit agreement was unexpected and a disappointment to us," says Paul Gudonis, Genuity's chairman and CEO. The company has trimmed staff and cut costs over the last several months to make it more attractive for Verizon to reintegrate. "Regardless of Verizon's position, we intend to continue to operate our business effectively," says Gudonis. Prior to Verizon's announcement, Genuity had drawn down an additional $723 million under a credit facility with the banks. It has cash on hand of roughly $1.3 billion. In January, Genuity signed up Verizon and Cisco Systems Inc. as its first Black Rocket Voice customers. Black Rocket Voice is designed to integrate voice and data traffic onto a single, multi-protocol IP network infrastructure utilizing Genuity's Tier 1 IP backbone. Verizon says it will continue to work with Genuity to provide voice-over-IP services for business. Verizon remains one of Genuity's largest customers, and intends to honor its $500 million "take or pay" commitment for Genuity services. Verizon, however, is no longer obligated to make further loans to Genuity, according to a Verizon statement. Related story:
M&A: Two deals were announced today, one to boost its network performance products and another to strengthen its cash position. Cisco Systems buys AYR Networks, while RedWire Broadband snatches up IntelliSpace's assets. Cisco acquires AYR Networks The purchase is designed to augment Cisco's network systems software designed for Cisco's routing and switching platforms. AYR develops high-performance distributed network services and scalable routing software technologies. Under the terms, Cisco will exchange up to $133 million of its common stock for all outstanding shares and options of AYR Networks. Cisco already owns a minority stake in the company. AYR's 30 employees will join Cisco's Internet Technologies
Division. The deal is slated to close in the first quarter of
Cisco's fiscal year 2003. RedWire deals to strengthen its cash position The purchase includes customer service agreements, building access contracts and equipment that comprise most of IntelliSpace's Southern California operations. Specifically, RedWire will acquire many of IntelliSpace's Class A office building deployments, VPNs and firewalls. RedWire has 300 lit buildings and roughly 1,000 broadband subscribers in Los Angeles, Orange and San Diego counties. "This in-market acquisition allows us to leverage and scale our existing technical and human resources and puts us in a strong positive cash flow position to pursue other acquisition opportunities while we continue to rapidly develop our wireless infrastructure," says Edward Romanov, RedWire's CEO.
Burke tapped to lead combined AT&T Comcast Comcast Corp. said Thursday that current Comcast Cable Communications Inc. President Stephen Burke will head up AT&T Comcast -- the cable giant that will be formed via the forthcoming merger of AT&T Broadband and Comcast. Burke will take that slot following the completion of the deal, which is expected to close during the fourth quarter of 2002. “Steve is the perfect person to manage the integration process and help build the combined company in the future,” Comcast Corp. President Brian Roberts said, in a press release. Comcast also announced its senior management team for the combined cable unit, which will be organized into six divisions, all reporting to Burke: Eastern, Atlantic, Southern, Mid-Western, Mountain and Western. Burke also named the heads of 26 cable clusters that will reside within the divisions, with each reporting to a division president. The appointments will become effective upon the close of the merger, Comcast said, noting that the company will make additional appointments as the close of the deal approaches. Of the 32 announced field positions announced Thursday, 16 are presently with Comcast and 16 are currently with AT&T Broadband. The appointments are: —Steve Burch will become president of the Atlantic Division, which will include the following systems and market leaders: Baltimore (Barbara Gehrig); Washington, DC (Jaye Gamble); Pittsburgh (Jeffrey Harshman); and Miami (Ellen Filipiak). —John Ridall, president of the Southern Division, which will include the following systems and market leaders: Atlanta (Steven White); Jacksonville (Len Falter); West Florida/Tennessee (Bill Conners); and Other Southern States (Len Rozek). —Dave Scott, president of the Mid-Western Division, which will include the following systems and market leaders: Chicago (Joe Stackhouse); Minneapolis/West Michigan (Tom Unglaub); Detroit (Mike Cleland); and Indiana/Kansas City (Rusty Robertson). — Trey Smith will become president of the Mountain Division, which will include the following systems and market leaders: Denver (Mary White); Dallas (Paula Trustdorf); Salt Lake City (Gary Boles); Seattle (LeAnn Talbot); Portland (Curt Henninger); and New Mexico/Arizona (Scott Binder). — Joe Fischer will become president of the Western Division, which will include the following systems and market leaders: Central California (Jeffrey Harkman); San Francisco (Don Schena); and Los Angeles (Debi Picciolo). - Jeff Baumgartner Related stories:
Aurora Networks doubles its funding Venture capital may be difficult to come by for start-up vendors stuck in the R&D stage of development, but companies with relatively tested new product are finding capital a bit easier to come by. Aurora Networks, makers of advanced optical transport gear intended to leverage current HFC cable plant architectures, announced that it has finalized a round of Series B funding totaling almost $30 million. The latest round was led by Sprout Ventures, an affiliate of Credit Suisse First Boston, and included additional funding from previous investors Battery Ventures, Castile Ventures and ComVentures. "In this kind of climate right now, one of the real positives was we were really oversubscribed. We didn't want to initially raise as much money as we did, but people wanted to join," explains John Dahlquist, a spokesperson for Aurora Networks. "VCs today are looking for companies that have been able to attract some good customers and have visibility of what the future looks like, versus just a hope and a prayer." To date, Aurora Networks has raised almost $60 million in funding. The latest round of funding will go to increasing the company's production capabilities in an effort to fill orders already placed by select North American MSOs. Aurora began shipping product at the end of last year, but order filling has ramped up during the second quarter of this year, Dahlquist said. Aurora has standing orders for gear in three major systems with one unannounced major MSO, and is a supplier to Liberty Media's upgrade of systems in Puerto Rico. - Duffy Hayes Related stories:
Adelphia files suit, Rigas family makes bail Bankrupt Adelphia Communications Corp. is not swaying from blaming the Rigas family for its woes, and has filed a civil lawsuit against the family and other former executives alleging they violated the Racketeer Influenced and Corrupt Organizations Act. The lawsuit, filed in bankruptcy court in Southern District of New York, alleges the "the Rigas Family Directors, together with other defendants, are responsible for one of the largest cases of corporate looting and self-dealing in American corporate history." The suit was filed against John Rigas, his three sons -- Timothy, Michael and James -- his son-in-law Peter Venetis and two former executives James Brown and Michael Mulcahey. Also named in the suit were John Rigas' wife Doris, his daughter Ellen Rigas Venetis and 20 companies controlled by the family. The suit, which seeks to recover damages from the Rigas family and their controlled entities, comes on the heels of a lawsuit filed by the Securities and Exchange Commission alleging that the defendants -- John Rigas, Michael Rigas, James Rigas, James Brown and Michael Mulcahey -- violated antifraud, periodic reporting, record keeping and internal controls provisions of the federal securities laws. The men named in the SEC suit were arrested yesterday. At their arraignment, the Rigases agreed to pay a $10 million bail arrangement. Related stories:
Collette gets CEO slot at Ucentric Broadband software company Ucentric Systems said it has named interactive television veteran Michael Collette as its new CEO. Before joining Maynard, Mass.-based Ucentric, Collette most recently served as senior vice president of marketing and business development for middleware vendor OpenTV Corp. Before that, he was senior vice president of marketing at ICTV Inc., a developer of iTV platforms and applications for “thin-client” digital set-tops. Collette is also the founder of The Bandies, an award show that recognizes achievements in new media entertainment and technologies. The third installment of The Bandies was originally slated for this year’s BroadbandPlus-The New Western Show, but is on hiatus for a year due to poor market conditions. At Ucentric, Collette will likely push the company’s strategy involving software for whole-home entertainment systems that leverage home networking technologies. Most recently, Ucentric and set-top marker Pace Micro Technologies teamed on a networked multiple-TV/multiple-DVR product, and demonstrated the combination at the 2002 National Cable Show in New Orleans. Ucentric also has participated in a number of MSO home networking trials, including pilots with Canada’s Rogers Cable Inc. in the Toronto area and with AT&T Broadband in Boston, Mass. Comcast Corp. also has tested Ucentric’s technology in a lab setting. - Jeff Baumgartner Related stories:
Increase in cable rates far outpaces inflation
Cable rates have shot up at a far higher rate than inflation despite the government's efforts to deregulate the telecommunications industry and foster competition, consumer and industry groups said Wednesday. The Consumers Union, which publishes Consumer Reports magazine, says rates have risen 45 percent since 1996, when the Telecommunications Act passed, ordering the deregulation of the cable industry. But industry officials dispute those numbers because deregulation didn't actually begin until 1999. The National Cable & Telecommunications Association says cable rates increased about 17 percent during the three-year period of deregulation. Either way, the numbers dwarf the rates of inflation
during that period. From December 1995 through March 1999, between
passage of the act and deregulation, prices rose 7.5 percent,
according to federal labor statistics. From March 1999 to last
month, inflation was at 9 percent. The group, which bills itself as an unbiased consumer service, urged Congress to shift oversight of cable operators to local regulators, much like telephone companies. Otherwise, the cable industry is vulnerable to abuse. "When you look at the price hikes and the broken promises to compete, it is clear that there needs to be stricter public accountability in the cable industry," said Gene Kimmelman, director of the Consumers Union's office in Washington. The cable industry said infrastructure, programming and other costs forced providers to raise rates. "The report unfairly singles out the cable industry and ignores the pricing pressures faced by all multichannel providers, including (direct broadcast satellite), which have been forced to raise their prices as well to compensate for increased programming costs," said Marc O. Smith, spokesman for the National Cable & Telecommunications Association.
• SEC probes AOL Time Warner AOL Time Warner posted second-quarter sales of $394 million, or 9 cents per diluted share. This was an improvement of last year's second-quarter loss of $734 million, or 17 cents a share. This is the first profit the company has posted since the mega merger was completed. Despite posting a profit, AOL shares plummeted more than 17 percent to a new 52-week low of $9.35, as of 12:46 p.m. EDT. • Advanced Fiber Optics updates OSPInsight platform
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