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Ethernet service provider says it's having trouble raising the cash it needs for fiber infrastructure, real estate
March 22, 2002
SAN FRANCISCO -- Yipes Communications, Inc., the defining provider of instantly scalable Ethernet services, today announced that it is seeking to restructure its business to enhance future growth opportunities. Yipes has filed a voluntary petition for reorganization under Chapter 11 in the U.S. Bankruptcy Court in San Francisco, California. This move will assure Yipes' ability to continue its business operations uninterrupted during the reorganization. Yipes has made arrangements for debtor-in-possession financing. This additional financing will allow Yipes to continue offering its existing customers 24x7 service and support, activate new customers and otherwise conduct business. "This proposed restructuring is unavoidable given the unprecedented pessimism affecting providers of capital to the telecom market," said Jerry Parrick, Yipes CEO. "Although our pioneering technology has proven its merits and customer demand for Yipes services is exceptionally strong, the `perfect storm' now battering the telecom industry has pummeled even the mighty, and we are no exception." Parrick said Yipes' fundamental business remains strong and customer loyalty, as measured by a major market research firm last summer, is among the highest found in any industry, not just telecommunications. But without substantial new funding, Yipes faces a cash squeeze in meeting fixed obligations such as fiber infrastructure and real estate. By restructuring those obligations to reflect current market values, Yipes will once again be able to exploit its many available business opportunities. "We are committed to delivering on our promises," Parrick said. "We are especially committed to continue - without interruption - providing customers the fastest, most flexible and affordable service they have ever enjoyed. When market conditions stabilize, we will be even better positioned to exploit the tremendous pent-up demand for instantly scalable optical Ethernet services." "The Ethernet revolution in metro optical networks that Yipes pioneered is here to stay, regardless of temporary market and financial conditions," said Deb Mielke, President, Treillage Network Strategies. "Fast, affordable and instantly scalable bandwidth is a powerful proposition that will outlast any near-term market adversity. Customers who have tried this new way of networking will never go back." "Underneath many a balance sheet problem is a fundamentally healthy business model," said Erik Suppiger, Senior Networking Analyst at Pacific Growth Equities, Inc. "Chapter 11 restructuring is a particularly effective vehicle for preserving a company's real potential in a capital constrained market environment. As Yipes lowers its cost structure, it will be in a better position to achieve success with its innovative technology." "Chapter 11 is a process, not an ending," said Kathryn Coleman, a bankruptcy lawyer and the partner in charge of the San Francisco office of Gibson, Dunn & Crutcher LLP. "It provides companies the breathing room they need to restructure their finances and adapt their business plan to changed market conditions. The goal, often realized, is to promote the reemergence of stronger, healthier companies." "Yipes changed forever the way we think about wide area services," said Matt Kesner, Chief Technology Officer of Fenwick & West, a leading Silicon Valley law firm. "Yipes freed us from the constraints of expensive, inflexible and complex legacy telco networks. We appreciate that Chapter 11 protects Yipes' ongoing operations and customer service during reorganization and look forward to a long relationship with this pathbreaking service provider." Yipes Communications Inc.
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