& cplSiteName &

Did Cogent's Aleron Buy Boost Cisco?

Light Reading
News Analysis
Light Reading

When Cogent Communications Group Inc. (Amex: COI) announced in late October that it was acquiring the assets of Aleron Broadband Services LLC, some mused that the carrier had finally shown the full extent of its ties to Cisco Systems Inc. (Nasdaq: CSCO), its main equipment supplier and financial surrogate (see Cogent Acquires Aleron Broadband).

Why? Through the acquisition, Cogent absorbed the sole customer of an up-and-coming threat to Cisco in the core routing market, Axiowave Networks Inc. Axiowave, in fact, announced a significant layoff shortly after the Cogent-Aleron deal was announced, a sign that it was bracing for a body blow with Aleron's sale (see Aleron Touts IP SLAs, Headcount: Cutting the Fat (Really)).

Cogent, which will take over Aleron’s network and customer base, also received $18 million in cash. By acquiring Aleron, Cogent -- and by extension Cisco -- has seemed to accomplish two goals: First, it netted more operating cash for Cogent and, secondly, it threw up some roadblocks for a Cisco core routing competitor. Ex-employee sources from Axiowave are grousing that the acquisition was a strategic move by Cisco to “put a nail in the company’s coffin.”

According to SEC filings, since 2000 Cisco has become a major debt holder in Cogent, restructuring away more than $269.1 million in loans in 2003, and becoming a major stockholder in the company.

Cisco’s increasing control has many wondering about the motives behind many of Cogent’s acquisitions. The Aleron acquisition was Cogent’s sixth this year; the others were Global Access, LambdaNet Communications, LNG Holdings, Symposium Omega, and UFO Communications Inc. (see Cogent Buys UFO, Cogent Adds to Euro Empire, and Cogent Buys the Boss's Network).

In each of its acquisitions, Cogent has picked up unprofitable companies that have cash and network assets, allowing Cogent to use the cash to finance its next few quarters. There have even been some rumblings that Cisco is using Cogent to make these acquisitions to keep near-new equipment from hitting the market in liquidation sales.

Cogent declined to comment on its relationship with Cisco when contacted by Light Reading. Cisco spokeswoman Robyn Jenkins says the company doesn’t comment on rumors, but she notes that ”Cisco has no voting control or say on the day-to-day running of Cogent.”

Samuel Wilson, senior analyst at JMP Securities, smacks down some of the conspiracy theories, saying that Cisco wouldn't go to such trouble to keep used equipment off the market.

“If that was their worry, Cisco would have no problem buying the equipment on the street and refurbishing it themselves,” Wilson says. “Cogent doesn’t have that many customers, and Cisco would be foolish to chance pissing off the big RBOCs who are its customers. Cogent 10 times over couldn’t buy what Sprint Corp. does in one year, so what do they have to gain by risking it?”

Conspiracy chatter aside, Cogent is far from profitable, even with the financial backing from Cisco. In its SEC filings on Nov. 15, Cogent’s net loss for the quarter ending Sept. 30 was more than $23 million, compared to a gain of $196 million in the same quarter in 2003. A closer look reveals that this was based on a line item “Gain—Cisco credit facility troubled debt restructuring” of $215 million in 2003 that was not repeated this year.

With losses mounting, the Cogent/Cisco relationship is definitely worth watching. Cogent’s goal of creating an “all optical” backbone to provide dedicated end-to-end bandwidth at a reasonable price has morphed from a simple plan to offer cheap bandwidth to an intricate acquisition strategy that's being indirectly financed by one of the most acquisitive networking companies in the world.

Of course, as Light Reading has previous reported, Cisco has been here before and, though it hasn't been as scorched as some vendors that helped finance carriers, it has picked a bushel of losers (see Cisco's Learning Experience and Cisco's Under-Powered Carriers ).

But there have been some successes, too. Cisco, in fact, shelled out millions to keep Sweden's Bredbandsbolaget AB (B2) going, and that carrier has been a pioneer in Ethernet and VOIP (see B2 Deploys Cisco VOIP Gear). The company has also had roaring success with e.Biscom SpA's (Italy: EBI) FastWeb (see Top Ten Service Providers to Watch).

So what explains the Cisco fascination with Cogent?

JMP’s Wilson believes Cisco is simply hanging on to Cogent until it can find an exit path to liquidity. “Cogent is a holdover from the bubble days of vendor financing,” he says (see Vendor Financing). “If Cisco is using its influence over Cogent, then it’d be pushing the bounds of what’s proper.”

— Chris Somerville, Senior Editor, NGS

(3)  | 
Comment  | 
Print  | 
Newest First  |  Oldest First  |  Threaded View        ADD A COMMENT
User Rank: Light Beer
12/5/2012 | 1:01:40 AM
re: Did Cogent's Aleron Buy Boost Cisco?

When a disgruntled ex-employee floats a conspiracy thoery, and experts tell you it doesn't make any sense, most journalists would need more than such flimsy stuff in order to write a story. Not Light Reading. Kudos!
User Rank: Light Beer
12/5/2012 | 1:01:38 AM
re: Did Cogent's Aleron Buy Boost Cisco?
For the record I ordered the power down of all the Axiowave routers PRIOR to any discussions with Cogent.

Victor R. Blake
Former Director of Network Engineering
of Aleron Broadband Services
User Rank: Light Beer
12/5/2012 | 1:01:34 AM
re: Did Cogent's Aleron Buy Boost Cisco?
When did you "ordered" the power down of all the XCR128?
Light Reading’s Upskill U is a FREE, interactive, online educational resource that delivers must-have education on themes that relate to the overall business transformation taking place in the communications industry.
Wednesday, October 26, 1:00PM EDT
Security: Tackling DDoS
Gary Sockrider, Principal Security Technologist, Arbor Networks
Friday, October 28, 1:00PM EDT
Security: The Plusses and Minuses of Open Source Software
Nick Feamster, Acting Director, Center for Information Technology Policy, Princeton University
Wednesday, November 16, 1:00PM EST
SDN 101
John Isch, Practice Director, Network & Voice, Orange Business Services
Friday, November 18, 1:00PM EST
SDN & Open Source
Christopher W. Rice, Senior Vice President of AT&T Labs, Domain 2.0 Architecture and Design
in association with:
From The Founder
Light Reading today starts a new voyage as part of a larger Enterprise.
Flash Poll
Live Streaming Video
Charting the CSP's Future
Six different communications service providers join to debate their visions of the future CSP, following a landmark presentation from AT&T on its massive virtualization efforts and a look back on where the telecom industry has been and where it's going from two industry veterans.
LRTV Custom TV
Next-Generation Technology Beyond DOCSIS 3.1

10|20|16   |     |   (0) comments

At SCTE 2016, Huawei's Liu Jianhua speaks with Alan Breznick for an exclusive interview.
LRTV Custom TV
Hybrid Video Solutions to Change TV, Change Future

10|20|16   |     |   (0) comments

At SCTE 2016, Huawei's Ian Locke speaks with Alan Breznick for an exclusive interview.
LRTV Custom TV
Huawei Future-Oriented Giga Coax Network

10|20|16   |     |   (0) comments

At SCTE 2016, Huawei's Allen Wang speaks with Alan Breznick for an exclusive interview.
LRTV Custom TV
Huawei at SCTE 2016

10|20|16   |     |   (0) comments

Join Alan Breznick of Light Reading and take a sneak peek at the Huawei booth at SCTE 2016.
LRTV Custom TV
Assuring Network Quality in a Rapidly Changing Environment

10|20|16   |     |   (0) comments

As the rate of change and complexity increases in agile networks, the importance of introducing DevOps methodologies for integrating active test and assurance solutions throughout the full service lifecycle becomes critical to ensure that customers are experiencing the service quality they demand. The industry landscape is changing, and software-based test and ...
Telecom Innovators Video Showcase
A10 Networks on Service Providers' Industry Needs

10|20|16   |     |   (0) comments

Light Reading's Steve Saunders hears how A10 enables service providers to accelerate, secure and optimize their application delivery to drive down costs, enhance service availability, and better respond to customer requirements, so they can improve customer satisfaction, monetize their network, and grow revenues.
LRTV Custom TV
New NFV Use Cases for Cable TV

10|19|16   |     |   (0) comments

A large number of NFV use cases are focused on the enterprise domain, looking at virtualization of customer-premises equipment (CPE). To date, there has been little focus on the use cases and business case for virtualization of the video content delivery networks required to deliver unicast and streaming video to consumers. Amdocs commissioned Analysys Mason to ...
Women in Comms Introduction Videos
Meet the Future Workforce: New Faces, Expectations & Motivations

10|19|16   |   5:33   |   (1) comment

Millennials and their younger peers, Gen Z, expect more out of their network and more out of their work. Intel's Lynn Comp shares how the industry can prepare for this new generation of workers.
LRTV Custom TV
ZTE Global Services User Congress 2016 Highlights

10|19|16   |     |   (0) comments

ZTE held its 2nd Global Service User Conference in Dusseldorf on October 13-14. Representatives from network operators, leading industry analysts and ZTE senior expertsattended the event, exploring the best practice in managed services and the vision to transform network operations into the operations center of the future (OpCF) in the software-defined networking ...
LRTV Custom TV
Cliff Grossner on Cloud & Network Synergy From Carrier Service

10|18|16   |     |   (0) comments

Local carriers offer the collaborated cloud and network service that benefits from their understanding of the regulations operating in different vertical markets.
In this interview, Cliff Grossner from IHS Technology talks about how this advanced service can support business agility and flexibility.
LRTV Custom TV
VeEX: Live from SCTE Cable-Tec Expo 2016

10|17|16   |     |   (0) comments

Cyrille Morelle, VeEX's President and CEO, talks with Light Reading's Alan Breznick live from the SCTE Cable-Tec Expo 2016. They discuss DOCSIS 3.1 technology, deployments and early lessons learned. New products on display include the CX350s-D3.1, CX380s-D3.1, CX310, AT2500-3G, FX150 OTDR and MTT WiFI Air Expert.
LRTV Custom TV
Smith Micro's Carrier-Grade WiFi Component

10|17|16   |     |   (0) comments

Join Carol Wilson of Light Reading as she interviews the CTO of Smith Micro, Dave Sperling.
Upcoming Live Events
November 3, 2016, The Montcalm Marble Arch, London
November 30, 2016, The Westin Times Square, New York City
December 1, 2016, The Westin Times Square, New York, NY
December 6-8, 2016, The Westin Excelsior, Rome
May 16-17, 2017, Austin Convention Center, Austin, TX
All Upcoming Live Events
Hot Topics
Attacks Have Major Internet Sites on the Ropes
Brian Santo, Senior editor, Test & Measurement / Components, Light Reading, 10/21/2016
Verizon Wants More Data on Yahoo Breach
Alan Breznick, Cable/Video Practice Leader, Light Reading, 10/20/2016
WiCipedia: Grace Hopper Promotes Diversity, Girl Scouts Code & How to Thrive
Eryn Leavens, Special Features & Copy Editor, 10/21/2016
Layer3 TV Comes to Town, Hints at Future
Mari Silbey, Senior Editor, Cable/Video, 10/21/2016
Oh Snap! Qualcomm Unveils X50, Its First 5G Modem
Dan Jones, Mobile Editor, 10/17/2016
Like Us on Facebook
Twitter Feed
BETWEEN THE CEOs - Executive Interviews
Join us for an in-depth interview between Steve Saunders of Light Reading and Alexis Black Bjorlin of Intel as they discuss the release of the company's Silicon Photonics platform, its performance, long-term prospects, customer expectations and much more.
There's no question that, come 2020, 5G technology will turn the world's conception of what mobile networking is on its head. Within the world of 5G development, Dr. ...
Animals with Phones
Live Digital Audio

A vital part of increasing the number of women in comms is transforming the ways companies can support and empower women. While progressive company policies that support both men and women in achieving work-life balance are a step in the right direction, creating a company culture that supports those policies can at times be more challenging.

During this show, we'll talk to Lynn Comp, Senior Director of Industry and Sales Enabling (ISE) in the Network Platforms Group at Intel, about why those challenges exist and how companies can overcome them. She'll provide insight into how Intel has worked to create a culture that supports work-life balance, and provide steps and guidance for other companies wishing to do the same. We will also leave plenty of time to get your questions answered live on the air.