IN THE NETPLEX
Blame it on AT&T: UUNET Technologies Inc., Fairfax, Va., blamed its declining stock price on AT&T's entry into the dial-up market, and PSINet Inc., Herndon, Va., blames the telco giant for its May layoffs. PSINet will refocus its energies on a high-end, more experienced consumer base. Considering that PSINet wanted 50 percent of its revenues from consumer dial-up and 50 percent from leased lines at one point last year, the regroup is coming a little late in the game.
When PSINet went public, it went on a spending spree that burned a lot of cash and stock to acquire many different companies, including software companies and overseas Internet service providers. Each quarter, PSINet has reported significant losses, while continuing to build points of presence. Less than two months ago, PSINet stopped its acquisition of an Israeli Internet service provider. This month, 85 people, 15 percent of its work force, were fired in part because the company abandoned its Pipeline graphical-based Internet software, which was designed to build "virtual communities" a la America Online and capture entry-level consumers. More than 200,000 had signed up and will now be expected to migrate to the complex InterRamp PPP. Sounds like a great opportunity for AOL or AT&T to pick up subscribers.
Out of the 85 people fired [PSINet's word, not ours] from the Pipeline abandonment, only 35 of them are in New York City, according to Crain's New York Business. Most of the D.C.-based victims have been making interview rounds between UUNET and DIGEX in Beltsville, Md.
Follow the money: Is PSINet worth a billion dollars and $54 a share? UUNET went public for $2 billion, which is about $63 a share vs. a face value of about $20 a share when the stock first started trading. Call it three times face value. In other words, UUNET stock went up by 50 percent (from around $40 a share to $60 a share) once the MFS Communications Co. Inc. acquisition was announced. UUNET had a buyer in place and has been in the green since going public. PSINet has been consistently in the red with no obvious buyers on the horizon, and expects over four times the face value of $12 a share. Its current value on Wall Street is $18-$20 a share. Assuming that PSINet creeps up to $24 a share and a potential buyer offered a premium of 50 percent for a total of $36 a share, PSINet's high has never touched $30 a share.
AT&T or MFS? The grapevine incorrectly produced a rumor that UUNET was going to be bought by AT&T, not MFS. We wonder if AT&T's name was put out as disinformation. Sources at AT&T indicate some sort of deal was in the works, while BBN Planet, which handles AT&T leased line business, went into a deep funk.
Recycling: UUNET's PR machine has made a habit of reannouncing products for quick noise, the latest being a "burstable T1," which is nothing more than its same old T1 product with a reworked press release. Perhaps next week the company will reannounce its nationwide network under a new name.
Definitely Freudian: Apple's choice to do a joint promotion with Paramount Films for the release of "Mission Impossible," including the Apple-sponsored Web site (www.mission.apple.com) makes one wonder if Apple intentionally picked this movie to reflect its own "Mission Impossible" in the PC market.
Merger madness: Several Internet service providers are making it known that they're looking for merger partners, and some folks are even daring -- or desperate -- enough to put up "For Sale" signs on Usenet.
InfoWorld loses it: InfoWorld's May 6 piece on the MFS/UUNET buyout called MFS a cable company not once, but twice -- in the headline and later calling MFS a telephone service provider. MFS is a phone company and doesn't provide one television channel, which is the typical definition of a cable company.
Internet City's intrepid reporter covers the hottest section of Washington's information technology market. Tips and tattles are always welcome at firstname.lastname@example.org; please write "Tales of the City" in the subject line.