Mergers & acquisitions

Corvis Loses Sales VP; Gains President

Corvis Corp. (Nasdaq: CORV) is shaking things up at the top.

Today, the company confirmed that Rick Bakosh, senior vice president for worldwide sales since August 2000, is no longer at the company. It also announced that it has completed the acquisition of Dorsal Networks and that James Bannantine, Dorsal's former CEO and president, will take over the role of president of Corvis.

While Bakosh is still listed on the company’s Website, and the company operator is still forwarding calls to his voice mail, he officially stepped down from his position about two weeks ago, says Keira Sheine, a company spokesperson. Sheine also says that Bakosh left on good terms and that both sides agreed that he should leave the company.

Bakosh’s departure and the completion of the merger come as Corvis struggles to reposition its strategy and win new business. On its last quarterly earnings call, the company reported only $8.7 million in sales under contracts with Broadwing Inc. (NYSE: BRW), Williams Communications Group, and Telefònica of Spain (see Corvis Reports Q1 Results). Pro forma net loss for the quarter was $41.3 million, or $0.11 loss per share, excluding restructuring and other charges, intangible asset amortization, and equity-based expenses.

For several months, the company has suffered one setback after another. The largest blow came when a deal with Qwest Communications International Inc. (NYSE: Q) was reduced from $150 million to $12 million (see Corvis's Qwest Deal Reduced by $138M). It also experienced a disappointing setback as WorldCom Inc. (Nasdaq: WCOM), a carrier it has hotly pursued for several months, announced further cuts in spending (see WorldCom to Cut Capex?). The company has started winning some small deals, such as the one with France Telecom SA to supply its festoon product (see France Telecom Picks Corvis). But more wins and bigger wins are certainly still needed.

Rumors have been circulating for about month that Bakosh, a former vice president of sales at Tellabs Inc. (Nasdaq: TLAB; Frankfurt: BTLA), was on his way out. Some people have speculated that Bakosh’s departure will be the first in a long line of shakeups at the company. But others say that Bakosh is merely the fall guy for a company that is suffering from one of the worst industry downturns in history.

“The biggest challenges for this company are things that are out of their control,” says Simon Leopold, an analyst with Merrill Lynch & Co. Inc. “They are trying to reposition themselves in a market that is imploding. Do you blame the head of sales at any company for a market transformation? I think that’s a bit of a stretch.”

Corvis is actively searching for a replacement, but there is no official word yet on who will replace Bakosh. For now, the rest of the sales team remains intact.

Bannantine, who previously served as CEO of Enron South America until January 2001, succeeds Dr. David Huber as president. Huber, who also founded Corvis and is the company’s largest individual shareholder, will remain chairman and CEO of the company. Bannantine joined Dorsal Networks as CEO in September 2001.

The Dorsal acquisition angered many shareholders, who said that Corvis was paying too much for a company without revenue (see Corvis Dorsal Deal: A Huber Spin-In?). The value of that deal has fallen by almost half since it was first announced in January. Based on today’s price of $1.17 per share, the value of the deal is only about $46.8 million, versus $2.18 per share or $87 million when Corvis announced it was buying Dorsal on January 29th.

— Marguerite Reardon, Senior Editor, Light Reading

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