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Wednesday, October 2, 2002 |
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• Warning pummels Charter's stock • Court approves Williams' reorg plan • Chip market grows 14 percent • Motorola scores a touchdown in Seattle • SCTE launches membership drive • 360networks poised to emerge from Chapter 11
The assets of bankrupt video-on-demand vendor Diva Systems Corp. could be on the block again after Gemstar-TV Guide International scuttled a deal to pick them up for about $40 million. Gemstar, in an 8-K form filed Sept. 26 with the U.S. Securities and Exchange Commission, said it notified Diva on Sept. 25 that “as a result of certain conditions that had not been satisfied by Diva prior to closing, [Gemstar] was not obligated to close the transaction and did not intend to close the transaction.” Although Gemstar did not specifically outline the reasons behind the decision not to go through with the deal, that decision could have been triggered by an adversary complaint Scientific-Atlanta Inc. filed in the US Bankruptcy Court for the Northern District of California on Aug. 22. S-A’s complaint, Gemstar wrote in the filing, alleged that Gemstar’s deal to acquire certain Diva assets would violate a federal antitrust statute. S-A, along with other IPG makers, has fought bitterly with Gemstar over interactive guide patents. In late August, the International Trade Commission declined to review an earlier decision that held that S-A, EchoStar Communications and Pioneer Technologies did not infringe Gemstar’s IPG patents. At the time, Gemstar said it planned to appeal the case. Diva, buried under a $500 million deficit, filed Chapter 11 in late May. Gemstar then agreed to pick up Diva’s software and technology assets as part of a pre-packaged bankruptcy deal. Diva has been operating as a debtor in possession while the reorganization and asset purchase details with Gemstar were finalized. Diva’s three MSO clients - AT&T Broadband, Charter Communications and Insight Communications - have cut deals with other VOD server vendors and on-demand content aggregators, and have been transitioning their networks off of the Diva system ever since. The question now remains what will happen to Diva and its languishing assets and intellectual property, which are comprised of a bevy of IPG patents and related VOD technology. Liberty Media Corp. and its Liberty Broadband Interactive Television subsidiary are among the potential candidates to snap up Diva’s assets on the cheap. Liberty Media and Liberty Broadband have bolstered their intellectual property portfolios recently through deals to control several iTV-related companies, including OpenTV Corp., Wink Communications and ACTV Inc. Liberty Broadband and Liberty Media officials could not be reached immediately for comment Tuesday morning.
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Warning pummels Charter's stock Charter Communications Inc.'s stock fell as much as 29 percent in early trading, following news that the MSO has revised its third-quarter growth forecast. The U.S.'s fourth-largest cable operator has lowered its Q3 operating cash flow growth guidance from 13.7 percent to 13 percent, citing losses in its basic analog customer sector. The company blames this erosion on competition from satellite providers that charge less for digital services. In August, Standard and Poor's lowered Charter's
credit rating from "BB" to "B+." At the same
time, Moody's Investors Service downgraded the cable operator's
outlook from "stable" to "negative." Despite the lowered forecast, Charter still expects to be cash-flow positive by the end of next year, fueled in part by a decline in capital expenditures as the company nears completion of its cable systems upgrades. As of 12:16 p.m. EDT, Charter's shares were off 47 cents, or 23.5 percent, to $1.53. Charter's stock price has plummeted 93 percent since the beginning of the year. Related stories:
Court approves Williams' reorg plan After six-months in Chapter 11 proceedings, Williams Communications Group Inc. says the pieces of its reorganization plan are falling into place and expects to emerge from bankruptcy this month. The US Bankruptcy Court for the Southern District of New York approved the reorganization plan which will give unsecured creditors a 54 percent equity stake in the company. For its $330 million investment, Leucadia National Corp. will receive a 44 percent stake. Leucadia will pay $150 million to lower bank debt, with the remaining $180 million will be going to Williams' parent Williams Companies. As part of the plan, Williams Communications will transition to WilTel over the next two years. Last week, Williams reached an agreement with SBC Communications to continue their long-standing contract. SBC had threatened to pull out of the contract, but Williams protested in bankruptcy court saying it would negatively affect its ability to reorganize by jeopardizing its proposed $150 million restructuring deal with Leucadia. As is the case in many restructurings, current Williams shareholders will get zip. A securities fraud lawsuit is pending in Tulsa. In the lawsuit, some shareholders allege that the company's directors and officers "knew or recklessly disregarded" the state of the economic environment when Williams Communications was spun off in April 2001. Parent Williams spun off the unit to unload its debt, according to the suit. As part of the restructuring plan, Williams Communications has set aside 2 percent equity to defend itself against the claims. The reorganized company will form a new nine-member board of directors. Four directors will be selected by a committee of unsecured creditors and four will be selected by Leucadia. The ninth seat will belong to Howard Janzen, CEO of WilTel. Related stories:
After ringing in its first year-over-year double-digit increase in sales since the industry's cyclical low in 2001, things are continuing to turn around in the semiconductor sector. Worldwide sales increased 2.2 percent in August, compared to numbers posted in the previous month, according to the latest research from the Semiconductor Industry Association. The industry reported sales of $11.68 billion in July. On a month-to-month basis, the European market led the sales increase, reporting a 2.8 percent rise. Asia-Pacific followed with 2.7 percent . The Americas reported a 0.7 percent loss. "The August data confirm that the semiconductor industry is in the midst of a broadly-based upturn”, said George Scalise, SIA president. “After 5.6 percent sequential growth in the first quarter of 2002 and 5.8 percent growth in the second quarter, the double-digit year-over-year increase in August sales is yet further evidence of a sustained and durable recovery," he said. Looking ahead, the organization predicts full-year 2002 sales of $143 billion, a 3 percent year-over-year increase.
Motorola scores a touchdown in Seattle Seattle Seahawks' running back Shaun Alexander may have been the star on the field in Sunday's game against the Minnesota Vikings, scoring five first-half touchdowns, but the team has drafted Motorola Broadband Communications Sector as its first-string advanced entertainment service provider. Motorola has equipped the stadium with its DCT5100 interactive digital set-top boxes, DigiCipher II Advanced Televisions Systems Committee (ATSC) high-definition encoders and Broadband Services Router 1000 integrated CMTS/router. The equipment will enable the Seahawks to deliver HDTV in the stadium's 82 luxury suites. The DigiCipher II ATSC encoder will broadcast the live action to each set-top box hooked up in each luxury suite. The CMTS will give the team the ability to launch IP and video-based interactivity at the stadium in the future. Separately, Motorola's Personal Communications Sector announced it will integrate SiRF Technology Inc.'s global positioning system chipsets and SiRFLoc Multimode location technology in select Motorola 3G devices. The technology enables the 3G devices to have location-based capability when the wireless devices are introduced in Europe and Asia later this year. Financial terms were not disclosed. The SiRFLoc Multimode technology is compliant with worldwide wireless location standards and operates in both network-aides modes and in autonomous modes. Related story:
SCTE launches membership drive The Society of Cable Telecommunications Engineers (SCTE) is calling on its members to help beef up the organization through its annual Member-Get-A-Member campaign. The campaign is designed to reward members that bring in new recruits. Chapters will earn points for each new member. For those who bring in the most new members, prizes will be awarded, including complimentary registrations to SCTE's Cable-Tec Expo, May 11-14 in Philadelphia. Unlike in years past, a point will be earned for each new certification candidate enrolled. A point also will be given for each new SCTE member. The membership drive will run through Dec. 31. Related story:
360networks poised to emerge from Chapter 11
Vancouver-based 360networks is poised to exit bankruptcy protection, after a bankruptcy judge in the Southern District of New York approved its reorganization plan late Tuesday, Oct. 1. A judge in the Supreme Court of British Columbia signed off on the company's Canadian plan of reorganization in early September, and 360networks hopes to emerge from Chapter 11 protection by Oct. 25. The company said no legal hurdles remain, and that it only needs to fulfill administrative duties before the plan's effective date. Under the plan, 360networks' pre-petition bank lenders will receive $135 million in cash, $215 million in notes and 80.5 percent of the reorganized company's stock. The company estimates the lenders are getting about 40 cents on the dollar for their $1.2 billion in claims. General unsecured creditors in the US and Canada will get 10 percent and 2 percent of the stock, respectively, and a share of an unspecified amount of cash. Unsecured creditors had asserted more than $ 800 million in claims, about $300 million of which were recognized. The remaining 7.5 percent of the company's stock will go to employees. Shareholders and bondholders with $ 1.4 billion of debt of a former affiliate, 360networks Inc., will not receive any compensation. Along with administrative, tax and other priority claimants, some contractors holding liens will be repaid at 100 cents on the dollar. Since filing for bankruptcy protection in June 2001, 360networks has refocused its operations in North America, sold assets in other regions, reduced its operating costs by cutting staff and lowered capital expenditures on its network. The company operates a 25,000-mile fiber-optic network and has another 725 miles of fiber in 48 cities in the US and Canada. When it was spun off from Canadian contracting giant Ledcor Industries Ltd. in 1998, the company, then called Worldwide Fiber, aspired to expand its network throughout North America, Europe, South America and Asia. In court, a 360networks executive testified that the reorganization would make the company one of the more stable providers of "lit," or operational fiber, and that its sales could increase because some customers have slowed the buildouts of their own networks. The reorganized 360networks won't be the only fiber operator with a slimmed-down balance sheet. Flag Telecom and Williams Communications have received court approval of their reorganization plans in the Southern District of New York recently, and are preparing to exit Chapter 11 protection in the coming weeks. Related stories:
• Corning supplies fiber to Guangdong Unicom Guangdong Unicom has selected Corning Inc. to supply optical fiber for a regional and provincial network in the Guangdong province. Under the terms of the deal, Corning will supply roughly 70 percent of the fiber needed for the project. The regional operator will use Corning's SMF-28 fiber for the network build. Once complete, the network will connect the province's largest cities, including Guangzhou, Shenzhen and Zhuhai. • Level 3 answers Ask Jeeves Level 3 Communications Inc. has landed a contract to supply Ask Jeeves search engine with colocation and IP transit services. Financial terms were not revealed. • DT certifies CommWorks signaling gateway Deutsche Telekom has certified CommWorks signaling system 7 (SS7) gateway. The SS7 acts as a bridge between the Public Switched Telephone Network and IP networks by translating signaling information between the networks. With this certification, the gateway is now certified in 20 countries.
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