Testing for a reaction, Global Crossing floated the idea of
a merger with its Asian counterpart Thursday morning prior to its third
quarter conference call.
It's likely the U.S. IP bandwidth provider, with a 59 percent ownership
stake in Asia Global Crossing, will try to convince
shareholders and directors to sign off on the merger. John Legere, Asia
Crossing chief executive officer is taking over worldwide operations
immediately from Tom Casey, Global Crossing's vice chairman and chief
executive officer. Casey will remain on the board of directors.
Legere said the merger comes at a good time for the company, as many
companies in the high-tech sector look for solutions to stay alive in a
depressed market.
"We have an historic opportunity to become the market leader as the global
economy recovers," Legere said. "In its short history, Asia Global
Crossing was able to establish the right partnerships in the leading
markets of the Asia Pacific region, to accelerate our entry in each country
and to extend our network to Asia's dynamic business centers. Now those
vital agreements are in place, and we need a single focused company to
capture opportunities along every point of our seamless global network."
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Legere is correct in his assessment of the Asian company's success in
deploying bandwidth throughout the Pacific Rim. Asia Global Crossing was
the first to successfully
link a trans-Pacific 2.5Gbps fiber optic pipeline in the region.
But it's also true that the company has met with little success in selling
the bandwidth it has available and paying off debts. While Asia Global
Crossing reported it brought in $1.2 billion in cash revenues, "recurring
adjusted EBITDA (earnings before interest, taxes, depreciation and
armortization) is expected to be significantly less than $100 million,"
officials said. Wall Street had expected $1.5 billion in revenues and
approximately $400 million EBITDA.
Investors felt slighted by the numbers, likely feeling they were
misled. Goldman, Sachs & Co. immediately downgraded the IP provider from
their highest rating to a mid-level recommendation and issued a warning to
its investors.
IT Channel News for VARs and Technology Integrators by CRN and ::
March 17, 1999. Global Crossing Snaps Up Frontier. March 17, 1999 March 12, 1999. FCC Mulling Mergers, RBOCs. March 12, 1999. Siemens Boosts Its U.S. Presence
http://www.crn.com/it-channel/archives.jhtml?archiveDate=03/01/1999HOME |
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"With the clarity of hindsight, our positive investment opinion on GX was
clearly wrong," the firm's statement read. "Even the top layer in the
emerging carrier universe has been more weakened than our data suggested.
Only a return to strong operating results can recapture investor confidence
and enthusiasm for the space and the stock. Even with a top operating
manager like John Legere at the helm, this will inevitably take some time."
Officials at the corporate offices have been fighting a mainly losing
battle with their profit sheet this year. Earlier, officials had hoped to
boost its Asian arm by moving
the operations of two of its other Asian subsidiaries to the struggling
bandwidth provider.
One of those two, IPC (a desktop trading system maker), is earmarked for
divesture. Global Marine Systems has also been selected for release.
Now, its likely Global Crossing will seek to merge its operations to
streamline operations and cut out redundancies. Legere, known as an apt
manager, will head up the housecleaning.
There has been no comment, yet, from Microsoft Corp.
and Japanese investment firm Softbank, the two other majority shareholders
in Asia Global Crossing.
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