Corvis Splits for Broadwing

Huber's empire changes its name, loses its service provider CEO, and heads for a 1-for-20 reverse stock split

September 29, 2004

2 Min Read
Corvis Splits for Broadwing

Corvis Corp. (Nasdaq: CORV) announced today that it has changed its name to Broadwing Corp., a final acknowledgement that the company would rather focus on its service provider future rather than its optical networking equipment past.

The company also announced it will perform a 1-for-20 reverse stock split, in order to boost the price per share.

The name change, of course, isn't much of a real change. When Corvis acquired the service provider Broadwing in 2003, it acquired the bulk of its current revenue (see Corvis Completes Broadwing Acquisition and Corvis & Broadwing: Together At Last). Company officials said they're going with Broadwing because it's a bigger brand that best reflects what the company does.

"The company said it found the Broadwing name the most visible brand for the company and one that commands respect in the marketplace," Corvis management states in a press release.

Functionally, the name change makes perfect sense. For the six months ended June 30, the equipment division that used to be Corvis only contributed 2 percent of the company's revenues -- and yet that was the name the service provider division was trading under in the financial markets.

Broadwing Corp. will trade under the BWNG ticker symbol on Nasdaq beginning October 8. The firm will be a holding company for Broadwing Communications LLC, the Austin-based service provider. Broadwing Corp. says it will still have an optical equipment business located right over there in Columbia, Md. That tiny division, which will be called Corvis, will sell mostly to the U.S. government.

Corvis founder David Huber is taking the reins as the holding company's president and CEO, while its service provider chief, Mark Spagnolo, has announced he's quitting after a six-month transition period. Spagnolo has only been at his post a little more than a year, but it was understood that his role would be temporary at the time it was announced (see Broadwing's Got a New Boss).

Corvis -- er, Broadwing -- also announced it will perform a 1-for-20 reverse stock split, whereby investors will have to trade 20 shares for one new share. Companies tend to do reverse stock splits to make their shares look more valuable and avoid delisting. Also, many institutional investors, such as some mutual funds, can't buy stocks under $5, so a reverse stock price -- which should boost the share up into the high teens -- might open up the company to new investors.

Broadwing Corp. says it will pay a dividend following the stock split. The stock dividend affects all Corvis/Broadwing Corp. shares, stock options, and warrants outstanding on the record date.

Investors weren't too terribly impressed with the announcement. Corvis shares dropped $0.08 (8.08%) to $0.91 in early afternoon trading on Wednesday.

— Phil Harvey, News Editor, Light Reading

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