The conglomerate Tyco International Ltd. (NYSE: TYC; London: TYI), famous mostly for the excesses of its former CEO and chairman, Dennis Kozlowski, said Tuesday it is selling its Tyco Global Network (TGN), possibly the largest undersea fiber optic telecom network in the world. As part of a major restructuring, the company says it also plans to cut 7,200 jobs and that it will close more than 219 sales, manufacturing plants, and other sites, while exiting more than 50 businesses. TGN, once the crown jewel of Tyco's telecom business, connects three continents with fiber capacity and spans about 60,000 kilometers. But in a prepared statement on Tuesday, Tyco chief Ed Breen reduced the network to stepchild status. "We believe consolidation is needed in this market," he said. "Since we are not prepared to invest further in this industry, we intend to exit the business." Tyco's underused undersea network seems like an obvious business to get rid of, given that there's a glut of bandwidth, and wholesale prices are plummeting. However, a confluence of factors shows that as soon as 2005, bandwidth pricing will stabilize, and carriers will begin increasing capital spending budgets as their revenues start to come back (see Bandwidth Price Revolution, the latest issue of Light Reading Insider, Light Reading's paid subscription research service).

The paltry price netted by TGN's assets probably won't be as great as the revenues such assets could realize in a few years, when more bandwidth-hogging applications are introduced. Tyco spent some $3.4 billion on network construction for the TGN between 2000 and 2002, according to Tyco's annual reports. And the company says the TGN had a pre-tax operating loss of $117 million last year, while the combination of all the other businesses it is exiting had an operating profit of about $55 million. But while Tyco expects to generate "at least $400 million" in proceeds from selling its other businesses, it's not saying what it is asking for TGN. And it didn't return calls for this article. Other recently disposed bandwidth assets give some idea of what TGN might be worth. Global Crossing Holdings Ltd., pending government approval, will sell its network for about 6.25 percent of what it spent to build it. Genuity Inc. (Nasdaq: GENU), however, only got about 2 percent of its investment back. Table 1: Getting Rid of the Glut -- Recent Asset Transactions

Date	Acquirer	Seller	Amount of Transaction	Est. Cost of Building Asset
June 2003	CII Communications LLC (controlled by Corvis Corp.)	Cincinnati Bell	$91M	$2.1B
Dec. 2001	Cable & Wireless PLC	Exodus	$850M	$2.3B
Oct. 2003	Reliance Infocomm Ltd.	FLAG	$207M	$1.2B to $1.6B
Feb. 2003	Level 3 Communications Inc.	Genuity	$60M	$3.2B
Source: Light Reading Insider's October 2003 report, "Bandwidth Price Revolution"

Given that range, TGN could fetch as little as $68 million or as much as $213 million. "The sale of the TGN will end a sad chapter that we can only term 'profitability meets the implicit capacity expansion of dense wave division multiplexing... and loses,' " writes Legg Mason analyst Barry Bannister, in a note to clients on Wednesday. Tyco says the whole restructuring will cause it to take a $400 million charge against earnings throughout the next fiscal year, $280 million of that in cash. Beginning in 2005, however, the savings from the restructuring will be around $230 million a year, the company says. Overall, Tyco's lost $297.1 million, or 15 cents a share, on revenues of $9.5 billion for its fiscal fourth quarter, which ended September 30. That compares with a loss of $1.44 billion, or 72 cents a share, on revenues of $9.4 billion during the year-ago quarter. The businesses that Tyco is ditching had combined annual revenues of $2.1 billion, or six percent of the firm's total sales, in fiscal year 2003. The company wrote down the $668 million value of TGN to zero, which was more than half the $1.2 billion in write-downs it had for the quarter. Meanwhile, as it reworks its businesses and flees from telecom, Tyco continues to live in a publicity nightmare, as its former CEO, Kozlowski, and CFO, Mark Swartz, stand trial for, among other things, pillaging the company's coffers and hiding millions in secret payments from shareholders. At the height of his power, Kozlowski stuck Tyco shareholders with a $2.1 million bill for a party he threw celebrating his wife’s 40th birthday in Sardinia. At the party, guests sipped vodka that flowed from an anatomically correct ice sculpture carved of Michelangelo’s "David," according to reports of the party and a court video tape.

— Phil Harvey, Senior Editor, Light Reading