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Enron founder Kenneth Lay died early Wednesday in Aspen, Colo. after a massive coronary. The 64-year-old was awaiting sentencing. He was found guilty on 10 counts of fraud and conspiracy related to the collapse of Enron amidst an accounting scandal. CNN Money has more details.
Written by Om Malik on July 5th, 2006 with no comments.
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Level 3, has been steadily acquiring companies in an effort of trying to get a better grip on the banadwidth market place, which is resurging because of growing demand from new digital application providers. Now Qwest has jumped into the fray, and has just acquired OnFiber Communications, a San Antonio, TX based provider of metro ethernet services for $107 million in stock. Update: The company had raised nearly $146 million in funding over the course of its five year life…
This is a company that was started by Infinera co-founder Jagdeep Singh, and was one of the telecom investments by Kleiner Perkins Caufield & Byers. I have written about the start-up, which survived the downturn, and now operates all-optical network in 23 metropolitan areas.
As an aside, Danny Bottoms, the CEO of OnFiber had worked with Qwest back in the day when company was getting started. And now he has come the full circle. (This story is chronicled in Broadbandits: Inside the $750 Billion Telecom Heist)
Back to the deal, OnFiber will have sales of $60 million in revenues and roughly $15M in EBITDA in 2006. UBS Research says that Qwest will continue to look at opportunities to acquire out-of-region CLEC assets as a means to reduce its third party access costs. They also think that the Qwest “management is focused on acquisitions with relatively short paybacks and easily identifiable synergies.”
Written by Om Malik on May 15th, 2006 with no comments.
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A couple of days ago, I pointed out that it pays not to listen to McKinsey. Continuing in that theme, Paul Kedrosky, skins Gary Hamel’s blatent play to get some Google love in today’s Wall Street Journal. Super consultant Hamel has two of his former big clients - Ken Lay and Jeffrey Skilling - both of now defunct Enron on trial. Just read the editorial or Paul’s summation, and then put it in the -whataloadofyouknowwhat bin!
Written by Om Malik on April 26th, 2006 with no comments.
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With the telecom service providers contracting faster than a bride’s waist in weeks leading up to a wedding, it should come as no surprise to anyone that Lucent and Alcatel are entertaining thoughts of a $33 billion merger, that would combine two of the biggest equipment suppliers to the “phone companies.”
The same rumor had surfaced five years ago, but this time, according to The Wall Street Journal, talks are pretty serious, and are at an advanced stage. Lucent Technologies chief executive Patricia Russo will become the chief executive of the combined company, the WSJ reports.
“We can confirm that Lucent and Alcatel are engaged in discussion about a merger of equals that is intended to be priced at market. There can be no assurances that any agreement will be reached or that a transaction will be consummated. We will have no further comment until an agreement is reached or the discussions are terminated.”
With Lucent’s market cap at around $12 billion and Alcatel being valued at $21 billion, I am not sure what they really mean by “merger of equals.” It must be lost in translation!
The deal between the two companies should come as no surprise to anyone. For most of the post-1984 split years, Lucent was the biggest supplier to the phone companies. However, the vendor financing, the Broadbandits and the telecom crash crushed Lucent.
Meanwhile, Alcatel, an also-ran in the telecom equipment market on the other hand hadn’t gone overboard with vendor financing and did a couple of things right: like hitch its wagon to DSL broadband technology. It slowly increased its presence, and market share. (Read my piece, Gorilla In The Mist, from 2003 on Alcatel, which first appeared in Red Herring. They indeed do some of the things that were suggested in the story, like focus on the edge of the network.)
As Bells have consolidated, the Alcatel’s gear is now powering most of the broadband networks, and future triple play projects like Project Light Speed. Lucent, meanwhile has seen its role shrink, but still has managed to hang on to the wireless business from the Bells. The two companies, have a good share of the Bell cap-ex. Together, they have a lot of things going for them. Here is a list of where together they will be #1 in installed base. Such as dying but still money generating Class 4 and Class 5 switches, Frame Relay and ATM (The old Cascade/Ascend and Newbridge) and of course, DSL.
Alcatel has a decent routing portfolio, and it has been winning market share in new broadband networks, with some of its new edge routers. Alcatel, still has some decent enterprise offerings. Beyond that, the two companies have a product portfolio that could make a good complimentary fit. Alcatel is strong in optical gear (SONET and WDM), and the Digital Loop Carrier equipment space. CDMA Wireless, where Alcatel is weak, Lucent is strong in CDMA.
But its not all hunky dory. The cultural challenges of integration, the control of French government over Alcatel affairs, and possibility of significant layoffs could be a big problem for the deal going forward.
The best thing these two companies could do is buy Juniper and become a serious headache for Cisco, but that’s in the future. But this will not be the first merger. Expect some really radical movements - Cisco and Nortel; Cisco and anyone; Siemens + Ericsson + Juniper … on and on. You know who wins in this - investment banks. Phat Phees Baby! Or as they say on Wall Street, Good Times are back.
Written by Om Malik on March 24th, 2006 with no comments.
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Back in the day, when satellite television was a new new thing for rest of the planet, I used to watch The Bold & The Beautiful. It was a guilty pleasure for some months, but then I quickly lost interest. The story did not change much, though the faces did change. Some characters became more beautiful, and others became less bold. Its been a few years I have even thought about the show, and the reason I did today, well because of Nortel Networks’ latest announcement that it will restate results… again.
How many times have we heard the same story from the same company? “This revenue is real — it was recognized in the wrong periods. The restatements do not affect the company’s cash position,” said a statement from CEO and President Mike Zafirovski. Oh come on now, you are no Chinese economy, that you can’t figure out what the hell is going on. A big NYSE company cannot keep its books properly?
“This time, it’s focused on contracts signed last year. And although the company insists it isn’t material, the perception that Nortel is still trying to resolve its accounting scandal is troubling. At some point, Nortel needs to have a clean slate so it can move forward strategically,” writes Mark Evans.
On a more recent tip, it seems the company is doing well - or that is it decides to re-state its results … In the fourth quarter 2005 company lost $2.21 billion, or 51 cents a share which seems terrible when compared to a net loss of $107 million, or 2 cents a share in the fourth quarter 2004. Since, this net loss includes a one-time special item - $2.5 billion or 57 cents a share to settle a shareholder class action litigation, the company actually earned 6 cents a share in the 4Q 2005, about two pennies better than what analysts were expecting.
Written by Om Malik on March 10th, 2006 with no comments.
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Lucent technologies is buying assets of Riverstone Networks , which makes carrier Ethernet routers for $170 million in cash. The deal is a signal that the carrier interest in Ethernet is on an upswing, and as more demands are put on the infrastructure, this market could see a sharp increase.
Lucent will acquire substantially all of Riverstone’s business operations, not including its cash and convertible subordinated notes, for $170 million in cash.
Credit Suisse First Boston analyst Paul Silverstein told his clients that he doesn’t believe that the deal “offers the prospect of significant potential reward.” Why? Because Cisco is so dominant, and at best he expects Riverstone to contribute $50-to-$100 million in sales to Lucent every year. Riverstone’s future has been under a cloud, and the company is being investigated by the SEC though a settlement might be around the corner.
Written by Om Malik on February 10th, 2006 with no comments.
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Michael Capellas has made a career out of taking over sinking ships, applying a slick paint job, and then flipping them to someone willing to buy. A few months after doing that, he exits, whistling and with a few million dollars in his pocket. He sold Compaq to HP, and pocketed about $20 million. Then more recently he sold MCI to Verizon, and has now left the building with $39.2 million. (He’s done really well in playing clean-up.) (AT&T’s David Dorman made chump change in comparison, for actually selling a company that was finally turning the corner.) Now as one reader points out that given MC’s history, Verizon should be worried. Look what Compaq did to HP!
Written by Om Malik on January 9th, 2006 with no comments.
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