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The David Huber Game

Column
Column
Column
2/27/2003

Someone should invent a David Huber Board Game, in honor of Corvis Corp.'s (Nasdaq: CORV) founder and chairman.

Imagine miniature optical switches for game pieces. The player moves by drawing a Game Card. Each card could have directions for moving the game pieces forward. Get to the end of the board and the shareholders win.

But like every bubble-era networking stock on Wall Street – there's a catch! Shuffled in with the Game Cards are Fine Print Cards, the itsy-bitsy detail stuff that makes Huber richer, the shareholders crazy, and takes away points.

Let's play, shall we?

Game Card: Corvis buys undersea transmission equipment vendor Dorsal Networks for about $90 million in stock. The company says the move gives it a leg up in a complementary equipment market and helps diversify its revenues (see Corvis Dorsal Deal: A Huber Spin-In?). Move ahead two spaces.

    Fine Print Card: Huber and his VC firm, OCG Ventures LLC, owned most of Dorsal, according to SEC filings. As for the undersea transmission market, Corvis has yet to report any significant revenues from that space, though it has spoken encouragingly of its equipment trials with carriers. Move back three spaces.
Game Card: Corvis has always promoted its use of cutting-edge components to build its switches. Move ahead two spaces.

    Fine Print Card: Over the past two years, Corvis has bought more than $20 million in components and other products from companies that are partially owned by Huber and/or OCG (see A Survey of the Corvis Food Chain). Huber owns about 25 percent of Corvis and about 34 percent of OCG, according to SEC filings. Move back one space.

    Fine Print Card (again!): In 2000 and 2001, Corvis did about $11 million worth of business with one vendor called ACME Grating Ventures, which turned out to be an on-paper corporation owned by Corvis and Huber through another entity (see Corvis Keeps Gratings in the Family). Move back two spaces.
Game Card: Corvis, through a newly formed partnership, announces it is buying Broadwing Inc.'s (NYSE: BRW) broadband assets for $129 million in cash (see Corvis & Broadwing: Together At Last). Move ahead two spaces.

    Fine Print Card: Broadwing's money-losing broadband network was built using Corvis equipment, the purchase of which was financed, in part, with Corvis shares, according to SEC filings (see Broadwing Reduces Share of Corvis). In addition, Corvis and a venture firm called Cequel III own a majority of C III Communications, the firm that bought Broadwing's network (see Broadwing Sells Broadband Biz). Cequel III's founder and president, Jerald Kent, is chairman of Avix, a project financed by OCG, according to the St. Louis Business Journal. Published reports say Avix is involved in linking a series of cable TV networks via fiber optic cable nationwide using Corvis switches. Move back five spaces.
This David Huber Game is tough to beat. Seems like Huber himself is the only one who is guaranteed to win, no matter what the next move is. And I'll bet many players are wondering if they'll ever reach the end of the board at this rate. If they do, will they think it was worth the trip?

— Phil Harvey, Senior Editor, Light Reading

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sevenbrooks
sevenbrooks
12/5/2012 | 12:33:18 AM
re: The David Huber Game

That people continue to have money invested here and that there are so many defenders of the good Doctor. Shareholders could easily sue Corvis for wanton disregard to their money.

<humor on="">

I have often wondered if "Dr. Evil" was modeled after Dr. Huber. Both are after world domination. Both have a prime enemy (Austin Powers and Ciena). Both fail but escape. Both have people around them that don't escape the failures. Both have a following even though they have always failed.

<humor off="">

seven</humor></humor>
CogswellCogs
CogswellCogs
12/5/2012 | 12:33:17 AM
re: The David Huber Game
"Game Card: Corvis has always promoted its use of cutting-edge components to build its switches. Move ahead two spaces.

Fine Print Card: Over the past two years, Corvis has bought more than $20 million in components and other products from companies that are partially owned by Huber and/or OCG (see A Survey of the Corvis Food Chain ). Huber owns about 25 percent of Corvis and about 34 percent of OCG, according to SEC filings. Move back one space."

Hmmm, let's see... the components work, they are used in the first OOO switch to ever be successfully deployed... yeah, Huber should have bought the stuff from other suppliers - the ones that the other guys (who never got their switches to work) buy from. Who cares if it works?? Results mean nothing these days.

Do I need to document more examples?

Thanks for another informative, non-biased job well done, Phil!! Remember, don't let the facts get in the way of a good story.

Cogs
fhe
fhe
12/5/2012 | 12:33:17 AM
re: The David Huber Game
They have been trading below $1 since last June...
DCITDave
DCITDave
12/5/2012 | 12:33:15 AM
re: The David Huber Game
Cogs,

You're right. There's nothing wrong with using any particular supplier.

There's nothing wrong with pointing out when a top exec profits from a supplier contract.

And there's nothing wrong with giving folks something to think about.

ph
sevenbrooks
sevenbrooks
12/5/2012 | 12:33:14 AM
re: The David Huber Game

Sheesh, are you missing the point.

Even if OOO switches are a bad idea, as it turns out to have been true (at least for the moment). Huber gets to line his own pockets with the shareholder's cash.

Read the books concerning the building of the Transcontinental Railroad. Both the leaders of the Union Pacifc and Central Pacific Railroads created firms to build the railroads. Then they sub-contracted the building to themselves. Both railroads went bankrupt but the leaders got wealthy from the construction firms.

That is the parallel that is being drawn. It matters not a lick whether the product works or doesn't work. What does matter that people are paying themselves whether or not they are good stewards of the shareholders money.

seven
BigFiberDog
BigFiberDog
12/5/2012 | 12:33:13 AM
re: The David Huber Game
After a meeting with him over 10 years ago while at GI, I thought there must be a special place in hell for someone like him (The image of Hitler in the Movie Little Nicky comes to mind) Good to see he is still keeping up appearances.
Scott Raynovich
Scott Raynovich
12/5/2012 | 12:33:12 AM
re: The David Huber Game
sub-c,

Is this what you're talking about:

http://www.lightreading.com/do...
sub-c
sub-c
12/5/2012 | 12:33:12 AM
re: The David Huber Game
Excellent point seven!

The only question I would ask is simply this: What is the relative values of the interests DH has in all these other companies? If DH has $100M invested in all these outside interests and $25M in Corvis, then I'd say the analogy is valid, and the questions need to be asked by the SEC with federal marshalls present. If the opposite is true, what then?

Maybe LR can do some research on this -- just what are the value of all of DH's outside investments?

Sounds like a good article to me.

sub-c
CogswellCogs
CogswellCogs
12/5/2012 | 12:33:12 AM
re: The David Huber Game
"Shareholders could easily sue Corvis for wanton disregard to their money."

"Both are after world domination."

"Both have a following even though they have always failed."

HAHAHAHAHAHAHAHAHA!!! Arguing the reverse through outrageous exaggeration! sevenbrooks, you are brilliant!

Admiringly,

Cogs
porn starr
porn starr
12/5/2012 | 12:33:11 AM
re: The David Huber Game
They moved to the small cap market, where you get about 200 trading days below $1 before they actually pull you. Tellium did the same thing.

The funny thing here is that all of Broadwing's broadband unit is being sold for $71 million less than the value of the Corvis switches it purchased. Through this investment, even Huber is admitting that Corvis products are worthless.
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