Cogent's Finances Revealed in Filing
For all of Cogent Communications Inc.'s bragging about advance customer orders and incoming investments, the company is losing lots of money and pulling in very little revenue. The service provider, which opened in August 1999, lost $28 million on revenues of a mere $90,000 during the first six months of this year.
Last year, it lost $11.8 million on no revenues, according to documents the company recently filed with the Securities and Exchange Commission in connection with its purchase of Allied Riser (Nasdaq: ARCC), a financially troubled public company (see Cogent to Buy Allied Riser and Allied Riser Prepares for Merger).
Such numbers paint a more complete picture of where Cogent is in the grand scheme of things. Indeed, the company has raised a significant amount of money, and it does have a powerful supplier/financier in Cisco Systems Inc. (Nasdaq: CSCO). But Cogent hasn't come close to proving whether selling small and mid-sized businesses 100 Mbit/s of bandwidth for $1,000 a month can sustain a profitable business.
The company does, however, have some enthusiastic backers. Its SEC filing reveals that it recently sold $62 million of its Series C preferred stock in a private placement transaction. That funding is augmented by the larger credit facility it forged with Cisco Capital Corp. this month, when it replaced its previous $310 million credit facility with a new one worth $409 million. Cisco Capital, in turn, can acquire up to 5 percent of Cogent's common stock.
Between its inception and October 15, 2001, Cogent has raised $178 million in private equity funding, it has arranged for a $409 million credit facility, and it carries capital lease obligations of about $20 million, according to the company's SEC filing.
Cogent's SEC filing also revealed that it has a landlord with its interests at heart -- its own CEO, Dave Schaeffer. The company pays about $470,000 a year for its office space lease to a Washington, D.C.-based partnership in which Schaeffer is a general partner.
And that office space is a bit roomier these days. Between June 30, 2000, and June 30, 2001, the company grew from 47 employees to 217. On October 9, however, it laid off 50 people in the process of streamlining its operations.
Allied Riser, the company Cogent is buying, has also lost piles of money in the past few years. It reported net losses of $14.6 million in 1998, $57.5 million in 1999, and $173.4 million in 2000. During the first six months of this year the company reported a net loss of $346.2 million on $16.5 million in revenues. Allied Riser now has about 71 employees, 32 of whom work for Shared Technologies of Canada Inc., a majority-owned subsidiary of the firm.
Of course, Allied Riser isn't the only troubled service provider Cogent has scavenged. On September 6, it bought what was left of NetRail Inc., an Internet service provider, for about $12 million through a bankruptcy sale (see Cogent Acquires NetRail's Assets).
- Phil Harvey, Senior Editor, Light Reading