Still some crap on Bloomberg's desk...
05/16 11:13
360networks Stock Declines on Concern About Network (Update2)
By Steve Maich
Vancouver, May 16 (Bloomberg) -- 360networks Inc. shares fell as much as 20 percent after the company backtracked on assurances it had enough money to build a $7 billion fiber-optic network.
The company, led by former Microsoft Corp. Chief Financial Officer Greg Maffei, said yesterday it will need to raise $300 million from investors by September to keep building the network. It also trimmed sales forecasts and lowered the amount it will spend this year to expand it.
360networks had been telling investors it would be able to finance construction by selling access to the network, which delivers data at high speeds by beaming light along strands of glass. The Vancouver-based company and rivals such as Global Crossing Ltd. are being hurt as telecommunications companies around the world slow spending on additional capacity.
``We all knew conditions in the market were tough, but now things have worsened significantly and we're dealing with a short- term, cash-crunch situation,'' said Stuart Isherwood at UBS Warburg, who cut his rating on the stock ``hold'' from ``buy'' and reduced his target price to $2 from $10.
The stock fell 13 cents to $1.39 in midmorning U.S. trading. Earlier it touched $1.22, the lowest since it sold shares to the public in April 2000 at $14.
Drops Forecasts
360networks last night lowered the amount it will spend on its network this year to between $2.2 billion and $2.4 billion from earlier forecasts of $3.5 billion to $4.5 billion, to conserve cash as sales slow. The company indefinitely delayed construction of its south Asian network and trans-Pacific cable.
360networks' long-term debt rose 31 percent in the first three months of 2001 to $2.49 billion from $1.9 billion. It is negotiating with equity partners including Alcatel SA to secure more financing in the form of senior debt, Maffei said on a conference call with analysts last night.
With selling and administrative costs more than tripling to $45 million in the quarter, and sales slowing, the company no longer believes it has the money to complete its business plan as originally expected, Chief Financial Officer Vanessa Wittman said yesterday in a conference call.
``Even if they get the money they need right now, there's no guarantee they won't be in a similar position again as the year progresses,'' said analyst Isherwood.
The company said it expects sales of $550 million to $600 million this year, down from earlier estimates of $650 million to $750 million. It slashed its forecast for earnings before interest, taxes, depreciation and amortization to between $20 million and $30 million. The company previously had expected $110 million to $160 million.
360networks shares have plunged 89 percent this year, making it the worst-performing stock in the Toronto Stock Exchange's TSE 300 Composite Index.
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