TELECOM COMPANIES FACE WOES IN STOCK MARKET
Bad financial news abounded in telecom industry Fri. as companies announced layoffs, stock prices dropped and financial reports were delayed. Downturn came in wake of announcements Thurs. that Nortel and several other high-tech companies were laying off large numbers of employees (CD Feb 16 p5). Nortel closed down 33% to $19.89 Fri. after it cut its profit outlook late Thurs. and said it would increase job cuts to 10,000.
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Among most troubled Fri. was Covad, which delayed its Feb. 27 financial announcement and saw its stock plunge 31% to $2 in pre- open trading Fri. before Nasdaq halted trading. Covad said it needed more time to review new accounting changes required by SEC that could “materially reduce” revenue for last year and increase its earnings before interest, taxes, depreciation and amortization EBITDA) loss. EBITDA is commonly used measure for emerging companies. Nasdaq said Covad trading wouldn’t resume until it gained “additional information” from company.
E.spire reported mixed bag in announcing 4th-quarter financial results late Thurs., telling investors it was EBITDA positive for first time but still was negotiating with bond holders to avoid defaulting on $15 million interest payment. E.spire didn’t make interest payments on 13.75% notes Thurs. but institutions that hold bonds hadn’t called them in yet because effort to renegotiate bond debt is continuing, spokeswoman said. E.spire CFO Bradley Sparks said company also was “cautiously optimistic” it would close on new credit facility soon. Without additional funding, company is funded into 2nd half of March, he said in financial announcement Thurs. On other hand, he said, company was doing well and expected to be profitable in 2002 or early 2003. Revenue for quarter was $93.9 million, up from $57.5 million year earlier.
Meanwhile, Teligent laid off 200 more employees, bringing head count down to 2,400 from one-time high of 3,600. “There is a lot of ugly financial news out there today,” said spokeswoman for another telecom company.
Rare telecom bright spot Fri. shone on high-speed mobile Internet access provider Metricom, which soared 29.4% on Nasdaq on bullish report by Ameri-First Securities. Shares of company, in which WorldCom is investor, hit $5.50, still far from 12-month peak of $100.25. Ameri-First put 12-month price target of $60 on company as “aggressive buy.” On Feb. 8, shares of Metricom, which provides mobile Internet service called Ricochet, dropped nearly 50% after company issued 4th-quarter results, including net loss of $114.4 million. Ameri-First report cited funding commitments of WorldCom and Paul Allen’s Vulcan Ventures. “Metricom/Ricochet is the only wireless theme offering that WorldCom has in its arsenal,” Ameri-First wrote in report that acknowledged company’s marketing shortcomings. “No one has launched a network of this magnitude, this quickly, for less dollars, ever.”