& cplSiteName &

Did Cogent's Aleron Buy Boost Cisco?

Light Reading
News Analysis
Light Reading
12/2/2004
50%
50%

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
readingsbelieving
50%
50%
readingsbelieving,
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!
vrparente
50%
50%
vrparente,
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
graceful_restart
50%
50%
graceful_restart,
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?
Educational Resources
sponsor supplied content
Educational Resources Archive
From The Founder
Cisco's Conrad Clemson, recently promoted to head up the company's Service Provider Apps & Platforms developments, talks to Light Reading's Founder and CEO Steve Saunders about how he's bringing cloud video, mobile and virtualization together to empower network operators.
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
Introducing OrbTV: Netscout's MWC Day 1 Recap

2|27|17   |   8:35   |   (0) comments


The executive team of Netscout reviews the first day of Mobile World Congress in Barcelona. Stay tuned for OrbTV -- Light Reading and Netscout's full coverage of the show. We'll have daily show recaps, service provider interviews and tours of the show floor.
LRTV Custom TV
Innovation at MWC: Low-Power IoT for Scottish Sea Lions

2|27|17   |   6:32   |   (0) comments


Light Reading's Liz Coyne tours the GSMA's Innovation City at Mobile World Congress 2017. A key theme of this year's event is how low-power or no-power IoT devices could become a part of our everyday lives. Imagine a world in which over 15 billion shipping pallets communicate with cellular networks down the entire supply chain. Or a parka that reveals your ...
LRTV Huawei Video Resource Center
Huawei Will Accelerate the Spread of the Video Business

2|27|17   |     |   (0) comments


What is the future of the booming video business? What changes will happen to the video industry chain in the future? Hunter Hu, VP of Huawei Video Product Line, shares his viewpoints and explains how Huawei can be an enabler and accelerate the spread of the video business.
LRTV Huawei Video Resource Center
Frost & Sullivan's Jonas Zelba on Going Beyond Connectivity

2|27|17   |     |   (0) comments


Telecom operators across the globe are trying to understand what can they offer beyond connectivity. Operators are already introducing new and innovative services but they are faced with challenges due to unclear business models. Jonas highlights that no one operator can offer all the services itself. Operators in the Middle East should look within their ecosystem ...
LRTV Huawei Video Resource Center
IDC's Paul Black on Cloudification

2|27|17   |     |   (0) comments


Paul Black from IDC shares his insights on how cloudification is expected to combile all aspects of digital transformation.
LRTV Huawei Video Resource Center
Industry Expert Michael Howard Talks About Cloud Native

2|27|17   |     |   (0) comments


Cloud Native is a really nice term and a lot of people are using it. But most of them have their own definition of what Cloud Native means. Michael Howard offers his take on the terminology.
LRTV Custom TV
4.5G Evolution: Peter Zhou on Advanced MIMO Technologies & 5G Business Prep

2|25|17   |     |   (0) comments


In the process of service transformation, operators need to catch three major opportunities and start deploying in 4.5G networks, such as video, household broadband access and digital transformation of vertical industries. 5G is coming. Operators don't need to wait for it to happen but should progressively deploy 4.5G networks by introducing 5G-oriented ...
LRTV Custom TV
What WTTX Can Deliver

2|23|17   |     |   (0) comments


Mohamed Madkour explains the benefits of WTTX while Dimitris Mavrakis discusses the challenges of delivering home broadband access.
LRTV Custom TV
Huawei on Mobile Broadband

2|23|17   |     |   (0) comments


Mohamed Madkour shares his vision on MBB for the next three years.
LRTV Custom TV
Analysys Mason Talks About the Future of Digital Operations

2|23|17   |     |   (0) comments


The future of digital operations has three key aspects: 1. Highly automated operations for both service and network; 2. Highly converged BSS/OSS for business and resources; 3. Highly merged management and control for real-time cloud native operations.
LRTV Interviews
Software Trends in the Telecom Sector

2|23|17   |   03:40   |   (0) comments


Heavy Reading senior analyst James Crawshaw talks with Telecoms.com Editorial Director Scott Bicheno about trends and developments in the telecoms software sector and what to expect at MWC 2017.
LRTV Custom TV
Huawei's Pre-MWC Analyst Briefing 2017 Highlights

2|22|17   |     |   (0) comments


Huawei shares its vision for this year's MWC.
Upcoming Live Events
March 21-22, 2017, The Curtis Hotel, Denver, CO
March 22, 2017, The Curtis Hotel, Denver, CO
March 22, 2017, The Curtis Hotel, Denver, CO
May 15-17, 2017, Austin Convention Center, Austin, TX
May 15, 2017, Austin Convention Center - Austin, TX
June 6, 2017, The Joule Hotel, Dallas, TX
All Upcoming Live Events
Infographics
With the mobile ecosystem becoming increasingly vulnerable to security threats, AdaptiveMobile has laid out some of the key considerations for the wireless community.
Hot Topics
Uber's HR Nightmare: Company Investigates Sexual Harassment Claims
Sarah Thomas, Director, Women in Comms, 2/21/2017
Broadband Has a Problem on the Pole
Mari Silbey, Senior Editor, Cable/Video, 2/21/2017
Verizon to Start Fixed 5G Customer Trials in April
Dan Jones, Mobile Editor, 2/22/2017
Cloud Rains on HPE Earnings
Mitch Wagner, Editor, Enterprise Cloud, 2/24/2017
Like Us on Facebook
Twitter Feed
BETWEEN THE CEOs - Executive Interviews
Light Reading founder and CEO Steve Saunders chats with Sportlogiq CEO Craig Buntin about sports data analysis.
Eyal Waldman, CEO of Mellanox Technologies, speaks to Steve Saunders, CEO of Light Reading, for an exclusive interview about the 100 GB cable challenge, cybersecurity and much more.
Animals with Phones
No One Likes This Click Here
Take a hint!
Live Digital Audio

Playing it safe can only get you so far. Sometimes the biggest bets have the biggest payouts, and that is true in your career as well. For this radio show, Caroline Chan, general manager of the 5G Infrastructure Division of the Network Platform Group at Intel, will share her own personal story of how she successfully took big bets to build a successful career, as well as offer advice on how you can do the same. We’ll cover everything from how to overcome fear and manage risk, how to be prepared for where technology is going in the future and how to structure your career in a way to ensure you keep progressing. Chan, a seasoned telecom veteran and effective risk taker herself, will also leave plenty of time to answer all your questions live on the air.