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Thursday, August 1, 2002 |
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• ADC bids farewell to optical components biz • Liberty snatches up France Telecom unit • Former WorldCom execs surrender to authorities • AT&T Broadband
bows quicker • Analysts downplay Nortel, Lucent fears A boost in digital cable and high-speed Internet access customers led Comcast Corp. to a 16 percent year-over-year increase in revenue. The cabler posted revenue of $2.71 billion, which topped analyst consensus estimates of $2.66 billion, according to Thomson Financial/First Call. Adjusted net income, excluding nonoperating items, amounted to $140.3 million, or 15 cents per share. It fell short of analysts' average estimates of 19 cents a share, but was up from $99 million, or 10 cents per share, during the second quarter 2001. The company's cable business posted revenue of $1.5 billion, up from $1.4 billion in Q2 2001. The main drivers of cable revenue growth were digital cable and high-speed Internet services. During the quarter, the company added 198,000 digital cable boxes, to end the quarter with 2.7 million boxes in service. The division also added 128,400 high-speed Internet customers to end the quarter with 1.7 million subscribers. Comcast raised its range estimates for 2002 digital cable subscription additions from 600,000 to 700,000 to a range of 700,000 to 800,000. Comcast expects its merger with AT&T Broadband to close by the end of the year. Steve Burke has been tapped to lead the newly formed AT&T Comcast. Related stories:
ADC bids farewell to optical components biz ADC has its eye on the prize: profitability. The telecom equipment maker is taking additional steps to cut costs, including getting out of the optical components business and refocusing its DSL access portfolio. The company has hired Lehman Brothers to assist in the evaluation of its optical components business, and determine whether the unit should be sold or just shut down. A final decision concerning the optical components business, which encompasses ADC's line of passive and active optical components, will be made by Oct. 31, the end of ADC's fiscal 2002. ADC also has decided to discontinue the development
and marketing of its Avidia DSL Access Multiplexer product to
focus on its iAN Broadband Access Gateway, a next-generation DSL
access platform. While both products are designed to boost the
ability of phone companies to offer high-speed access over copper
wires, the iAN Broadband Access Gateway offers more advanced services
such as Internet telephony. The moves are designed to strengthen ADC's balance sheet, said Rick Roscitt, ADC's chairman and CEO. During fiscal year 2002, ADC closed 41 facilities and cut 3,300 jobs. The company expects to consolidate and close additional facilities during the fourth quarter. At the end of the third-quarter, ADC had 9,200 employees, but warns further costs will be made this year. ADC expects to take a one-time, yet-to-be-determined restructuring charge in the third quarter. On July 10, the company cut its third-quarter outlook. It expects to post a third-quarter loss of 5 cents to 7 cents a share and record revenue of $235 million to $245 million. In May, the company predicted revenue could be as high as $295 million. ADC is slated to release its third-quarter results after the market closes on Aug. 22. As of 11:19 a.m. EDT, ADC shares were teetering near their 52-week low, down 11 cents, or 6 percent, to $1.69. The company's shares have fallen roughly 61 percent this year. Related stories:
Liberty snatches up France Telecom unit It's the old adage, "if at first you don't succeed, try, try again." After failing to win approval to purchase Deutsche Telekom's cable units in Europe, Liberty Media Corp. has inked a deal to acquire France Telecom's cable operator N.V. Casema. The agreement will jump start Liberty Media's efforts to expand its footprint in the European market. The company has been searching for some assets ever since German regulators nixed its plans to acquire six of DT's cable units in February. German antitrust regulators said such a deal would have worsened the outlook for competition. Under the terms, Liberty Media will fork over $733 million in cash for the Dutch cable operator. Casema's network passes 1.5 million homes, offering subscribers analog and digital video services as well as broadband access. The deal, which is subject to regulatory approval and other customary closing conditions, is expected to close in the fourth quarter. Related stories:
Former WorldCom execs surrender to authorities As if misreporting billions in expenses and filing for bankruptcy wasn't enough, two former WorldCom Inc. executives have surrendered to federal authorities to face charges related to financial wrongdoing. Scott Sullivan and David Myers surrendered at an undisclosed location early this morning. Details of the charges against Sullivan and Myers have not yet been disclosed. The complaint was expected to be unsealed in federal court in Manhattan later today. Until recently, Sullivan served as WorldCom's chief financial officer and Myers held the post of controller. Last week, John Rigas, two of his sons and two other Adelphia Communications Corp. executives were arrested on charges of conspiring to commit securities fraud. At the time of their arrest, rumors began to circulate that former WorldCom executives would be the next group to face the criminal justice system. WorldCom recently filed for Chapter 11 bankruptcy protection. In its filing, WorldCom listed $107 billion in assets and $41 billion in debt. The Enron filing, which was the largest in U.S. history for a short spell, pales in comparison, coming in at almost half of WorldCom's filing. The bankruptcy was fueled by an admission by the company that it misreported nearly $4 billion in expenses. Reports have circulated that the Department of Justice may bring charges against WorldCom as a company, but WorldCom officials have denied any knowledge of a DOJ probe. The company has said it is cooperating fully with federal authorities. WorldCom's stock was officially delisted from the Nasdaq on July 30. Related stories:
Motorola Inc. has targeted a town in southwestern Missouri as the spot for the first rural deployment of its high-speed wireless broadband access product, dubbed Canopy. NexLink communications Inc. has deploy the fixed wireless system in Republic, Mo., and is offering high-speed Internet access services to the residents and businesses. Before the official launch on July 25, NexLink had signed up 30 customers. The company expects to grow that number to 300 by early next year. The service packages range from $49 per month for data connections up to 128 kilobits per second to $299 per month for businesses that need download speeds of more than 1 megabit per second. Motorola introduced Canopy in June. The Canopy system includes a community-sized access point with integrated antennas. Each access point has roughly a two-mile reach, but can be extended up to 10 miles with the addition of a Canopy reflector kit. The product can be deployed as a stand-alone system or it can be used to extend the reach of wired IP distribution systems, such as DSL and cable, Motorola said. Separately, NextNet Wireless has teamed with Grand Forks Wireless Inc. to launch NextNet's non-line-of-sight high-speed wireless service to residential and business customers in Yuma, Ariz. Grand Forks Wireless holds a MMDS license in Yuma and several other markets in the United States. The two companies have plans of expanding the Expedience NLOS service to other US markets in the future, although no timetable has been released.
AT&T Broadband bows quicker
Hoping to lure Internet power users, AT&T Broadband said it has started to offer a faster broadband tier to residential cable modem customers in a spate of markets. The quicker service, dubbed “UltraLink,” will allow the MSO’s cable modem subscribers to download data at up to 3 megabits per second, and upload information at rates as high as 384 kilobits per second. AT&T Broadband’s flagship tier, by comparison, offers up to 1.5 Mbps up and 256 kbps down. Speeds for both tiers are considered “capped” and may vary depending on elements such as PC performance, accessing non-cached or cached data, number of users and overall Internet traffic. AT&T Broadband and other MSOs will be able to offer guaranteed speed tiers after migrating their high-speed grids to DOCSIS 1.1, a CableLabs specification that includes quality-of-service elements. AT&T Broadband is offering UltraLink starting today in Dallas, Denver, Salt Lake City, the San Francisco Bay Area, Seattle, St. Paul, as well as a number of communities in the MSO’s Michigan and Rocky Mountain markets. The MSO plans to offer UltraLink in additional markets this fall, including Atlanta, Florida, Pittsburgh, Portland, Richmond and Southern California, and the company continues to unify the capabilities of cable system footprints that serve former TCI and MediaOne markets. Company spokeswoman Sarah Eder added that AT&T Broadband also plans to trial a lower speed cable modem tier later this year. Such a tier could be used to attract a wider range of Internet “newbies” and current dial-up Internet customers. With UltraLink, the higher speeds will come at a higher price. AT&T Broadband will charge $79.99 per month to customers who opt for the higher tier and own their cable modem, and $82.99 per month to customers who lease the equipment from the MSO. Under that same scenario, the MSO’s flagship cable modem service goes for $42.95 per month and $45.95 per month, respectively. UltraLink will target customers “who have set up home networks, send or receive large files such as when downloading software or enjoy other bandwidth-intensive applications,” said MSO Vice President of Internet Services Karl Ossentjuk, in a press release.
Analysts downplay Nortel, Lucent
fears
As the telecommunications slump deepens, concerns about the long-term viability of Lucent Technologies Inc. and Nortel Networks have flared with every new dismal forecast for the industry. In fact, though, most observers say both telecom equipment makers have enough cash to weather the next 18 months. Also, if telecom spending continues to decline, the companies could stave off bankruptcy through creative dealmaking. Steven Levy, a managing director with Lehman Brothers Inc., said Lucent and Nortel would not have held debt offerings this spring, which diluted their earnings per share, if they intended to file for bankruptcy. The transactions were intended to help the companies raise cash and stay solvent in case the telecom equipment market continues to deteriorate through 2003. The companies' respective debt loads, while significant, are not major elements of their overall cost structures, Levy said. For example, Lucent's interest expense for the quarter ended June 30 was $107 million. Nortel had no interest payment for the same quarter and made a relatively modest quarterly long-term debt payment of $55 million. With Nortel's stock falling to roughly $1 and Lucent trading at $1.71 per share as of late Wednesday, July 31, some analysts have warned that delisting from the New York Stock Exchange could hurt the companies' ability to tap the capital markets for financing. But delisting is not a foregone conclusion, other industry watchers argue. "The markets look at a number of criteria besides share price when considering delisting, like institutional ownership, market cap, etc.," said Hasan Imam, a partner with Thomas Weisel Partners LLC of San Francisco. "I cover companies that have been trading below $1 for many more days than 30 and have not been delisted." If Nortel were stricken from the New York Stock Exchange, where it trades, it could continue to trade on the Toronto Stock Exchange, another analyst said. Still, conditions for the large networkers are degrading much faster than anyone had anticipated. Last week Murray Hill, N.J.-based Lucent announced a third-quarter loss of $7.9 billion on revenues of $2.95 billion, a 16 percent sequential revenue decline. In mid-July, Nortel reported a net loss of $697 million on revenues of $2.77 billion for the quarter ended June 30, a 5 percent sequential decline and 40 percent annual decline. Susan Kalla, a telecommunications analyst with Friedman, Billings, Ramsey & Co., said Nortel and Lucent ultimately may have to consider bankruptcy as a way to restructure their balance sheets. The option, she said, is for them to "fall under their own weight at their current capital structures." Amid an ongoing effort to sell noncore assets, Lucent continues to paint an optimistic future, and it sternly denounces suggestions it faces bankruptcy. "Our cash position remains very strong," a company spokesman said. "We continue to see improvements in gross margin, operating expenses, vendor financing and accounts receivable. The suggestion that Lucent is considering bankruptcy has no basis in fact and is completely irresponsible." Lucent is in compliance with its credit covenants as of the quarter ended June 30, the spokesman said. It reported cash and short-term investments of $5.4 billion, debt maturing in one year of $173 million and long-term debt of $3.2 billion. Nortel declined to comment. For its most recent quarter the Brampton, Ontario-based company reported cash and equivalents of $4.9 billion and long-term debt of $4.1 billion. Gabriel Lowy, a vice president with French investment bank Credit Lyonnais, said Lucent and Nortel could merge or make business alliances to avoid the "black eye to themselves, investors and bondholders that a bankruptcy would cause." Nortel could avert bankruptcy by selling or spinning off most of its assets, perhaps retaining its wireless operations, another analyst said. Michael Duran, a partner with New York venture capital
firm Apax Partners Inc., large networkers including Nortel, Lucent,
Siemens AG of Germany and Alcatel SA of France are now "aggressively"
auctioning assets.
• Phoenix to get high-definition cable from Cox
Cox Communications will begin offering high-definition cable television service in the Phoenix area beginning late this month or in early September, the company said Wednesday. Cox will start testing the system next week to make sure it works properly, said Ivan Johnson, vice president of community relations and televideo for Cox Communications Phoenix. HDTV provides a picture that is six times sharper and has twice the color resolution of traditional analog television, he said. "It's the equivalent of going from vinyl records to CDs," he said. Initially, high definition programming on the Cox system will be limited to HBO and Showtime premium channels and the local ABC affiliate, KNXV-TV, Channel 15. Cox is negotiating with other local and cable television stations to add other high-definition channels to the lineup, and they could be available by the time the service is launched, Johnson said. HBO HD offers a selection of feature films and HBO Original Movies in high definition. Showtime HD programming includes theatricals, original pictures, original series and special events in high definition. Between 60 and 70 percent of ABC's prime programs are available in high definition, Johnson said. To view the Cox service, customers will need an "HDTV-capable" or "HDTV-ready" television set, which costs $1,000 or more, and a Cox high-definition set top box, which costs about $500 and will be available at retail outlets. Also customers must subscribe to Cox Digital Cable service and the HBO or Showtime channels to receive the high definition programs. There will be no additional monthly subscriber charge for HDTV service. • Telecom leaders kick off road show A group of telecom companies are joining forces to promote their Headend-to-Home solution in six cities across the United States. The H2H solution combines hardware, software and professional services required to deliver next-generation, digital TV and other video services over broadband networks. Companies involved in the road show include Advanced Fibre Communications, Myrio Corp., Riverstone Networks and Video Tele.com. H2H will be presented to telephone companies and service providers beginning today in Austin, Texas.
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