To wit: Cogent's still hanging on, and it even managed to increase its revenue. Meanwhile, most carriers in its market have restructured or abandoned Ethernet services to larger competitors (see Yipes Files Chapter 11: Is Ethernet a Sustainable Business Model?, Has GiantLoop Done a Loop?, and OnFiber Scoops Up Sphera for $2.3M). But Cogent's progress comes with a price, as these revenues are built on a mountain of debt, and the payments on that debt are growing. First, the good news: For the three months ended March 31, 2002, Cogent reports $3.542 million in services revenue. That may sound like small potatoes, but it's nearly 17 percent more than the company's total 2001 revenue of $3.018 million. What's more, about 60 percent of this quarter's revenue came directly from Cogent's core business, and not from its recent acquisitions of NetRail and Allied Riser (see Cogent Buying Binge: Another Bubble? ). Basic and diluted net loss per common share was $6.81, compared with $9.12 one year ago.
Clearly, customers are logging on. At the same time, though, Cogent is still spending big to earn a relatively scanty living. And that leads to the bad news: Cogent's revenue this quarter was less than half of the total $7.1 million in interest expense they paid. Operating expenses for the quarter just ended were $20 million, compared with operating expenses of $12.9 million one year ago and $14 million in all of 2001.
There's more: Cogent has about $102 million in cash, but it's not coming from internally generated funds. For instance, the carrier borrowed about $7.7 million from its $409 million credit facility with chief supplier Cisco Systems Inc. (Nasdaq: CSCO). This worsened operating cash flow to a negative $9.7 million, compared to $7.5 million at the same time last year.
Cogent's total debt is now about $260 million, and its debt-to-equity ratio is a stunning 250 percent.
None of these glaring items represent any new worries for Cogent, but they do raise the question of when Cogent will turn into the profitable entity its backers envision.
The list of those backers features some surprises, too: Key stakeholders include high-profilers Erel Margalit of Jerusalem Venture Partners and James Wei of WorldView Technology Partners:
Table 1: Who Owns Cogent?
|Stakeholder||Percent of voting control|
|Jerusalem Venture Partners (Erel Margalit)||25.1%|
|Worldview Technology Partners (James Wei)||19.7%|
|Oak Investment Partners||17.3%|
|David Schaeffer (CEO)||14.7%|
|Broadview Capital Partners (B. Holt Thrasher)||7.4%|
|Cisco Systems Capital||5.7%|
|Smallcap World Fund||5.4%|
|Source: SEC filings|
— Mary Jander, Senior Editor, Light Reading