The deal, which involves the issue of $101 million in new Corvis stock to Focal's shareholders and "the assumption or payment of approximately $109 million of Focal's existing debt and other long-term capital lease obligations," will not come as a shock. Corvis was on the hunt for a carrier that would help expand the market and cut the access costs of its existing subsidiary long-haul carrier Broadwing Communications LLC (see Corvis Gets Ready to Pounce).
"Focal will help us expand our nationwide network footprint and reduce our access costs," said Corvis CEO David Huber in a prepared statement. "They will also help add valuable customers and revenue without putting undue stress on our balance sheet." Corvis expects to close the acquisition in the third quarter.
Focal provides voice and data services to business customers, resellers, and other CLECs. It expects to report 2003 revenues of about $320 million.
re: Corvis Buys CLEC for $210M Not a bad deal, better than the Allegiance attempt, at least from a cost perspective.
Could one of the technical experts be so kind as to explain how easy/hard/expensive it is to tie in a network like Focals to Broadwing? The concern would be that if Broadwing was built using the "Huber model" and Focal obviously was not, how much equipment must be replaced, how much remapping must be done of the network, et al?
re: Corvis Buys CLEC for $210M The answer is it depends. Like many things its all grey.
First, if you look at the 2 network maps you will find dramatic overlap. One would have to guess that the bulk of Focal customers are in places that Broadwing already serves. This is good news from a long term cost saving standpoint.
Since Focal already exists, one could just leave its network in place. Alternately, Focal's network could just get wavelengths from Broadwing. Finally, these networks could share wavelengths. Costs go up as integration gets tighter.
Question is what do Focal's customers want? Is there a better deal to expand BW service offerings to include some of Focal's? Should BW service offerings replace Focal service offerings where possible?
But back to my first statements, this gives BW a straightforward way to add traffic to a network that is in place.
re: Corvis Buys CLEC for $210M The answer is really simple. Shut down Focal gradually and throw its network away. The Corvis LIGHT-based network that broadwing has can handle much more capacity than is currently travelling over it. The aging electric legacy network that Focal has brings negative value. Its an expensive drain on profits.
The customers need to be carefully migrated in an invisible way, but other than that the only thing I can think of doing is starting an employee retraining program to bring them up to speed with modern networks.
Corvis will bring the new customers in, scrap the old network and turn the new revenue into 100% new marginal profit. Don't be SHOCKED if this happens again. As Corvis gets bigger and more profitable, its appitite for eating larger and larger networks will grow. They are trading money for profit now. And with the LIGHT-base network, they can grow to infinity.
And don't be suprised if their next move is against an international undersea operator. They still have Dorsal in their back pocket ready to go despite what the peanut gallery is saying.
I'm glad to see that Qwest learned its lesson last time and didn't try to get in the way of this BIG DEAL.
You should probably actually take a look at Focal's website. Its pretty clear:
1 - That Focal's backbone was Optical. 2 - That Focal sold primarily to Small-Medium Enterprises (SME). 3 - That these services were delivered primarily over T-1.
Now, given that your local flower shop is an SME can you explain to me how this relates to an all optical network? I guess my point is that Access to smaller customers generally involves copper at some point.
Finally, I think you confuse Network Operators with Network Equipment Suppliers. Undersea cable operators buy equipment from companies like the former Dorsal. Buying one of them does not necessarily create a market for these products and certainly does not eliminate competitors for them.
By the way, Corvis has been and is continuing to shop its equipment business.
You would have better luck explaining that stuff to a dead cat than fw23. Intelligent comments should be saved for those of us who are educated enough to understand.
It sounds like Focal's footprint is not anywhere that Broadwing isn't already, so the question would be are they going to keep Focal's network running, or are they going to migrate their customers over to Broadwing?
For the past 2 quarters in which Broadwing's revenues have been fully incorporated by CORV they have lost the staggering sum of $173 million on $285 million of revenue.
For the past 2 quarters telecom revenue and the cost associated with that revenue has been flat. Direct cost, forget SG&A, R&D and depreciation, just direct cost is 75% of revenue.
re: Corvis Buys CLEC for $210M Please stop ksig25 - all we need is two of them. Just kidding buddy. Now, getting away from "Dexter's Lab [fw23]"; why would Corvis scrap Focal's network when the problem was having a presence that was closer to the customer (which Focal's network is supposed to provide)? I also have a question for Seven - why would Corvis sell the equipment company when part of the network buildout depends on the equipment?
re: Corvis Buys CLEC for $210M Sunra, let me see if I can give you the answer fw23 will most likely give.
The answer is LIGHT! All you dino-brains and dot-BOMBERS won't stop bashing until Corvis, Broadwing, and Dorsal show you the LIGHT! Corvis is making more money than any company in the world, they are just hiding it so that Rumsfeld and the boys at the Pentagon can use them to build an trans-atmospheric network to the moon, then to Mars. You will see how much Corvis really has when they go HEAD<to>HEAD with QWEST and pull and end-around, buying them. Soon Broadwing will buy EVERY antique electronic network in the world and retire them all, and the whole world will see the LIGHT from Huber's ALL-OPTICAL vision.
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