Metricom files for bankruptcy protection
news.ft.com
By Paul Abrahams in San Francisco
Published: July 2 2001 21:22GMT | Last Updated: July 3 2001 10:06GMT
Metricom, the provider of Ricochet, the US high-speed
wireless internet service, on Monday announced it was
seeking Chapter 11 protection from its creditors.
The troubled San Jose-based company became the latest
Silicon Valley causality to be struck down by
weaker-than-expected sales, poor internal cash-flow and
an inability to tap the capital markets in the current
environment.
Ralph Derrickson, interim chief executive, said the company had been unable to
raise additional capital. "Consequently, management and the board of directors
decided this action would be in the best interests of all Metricom's stakeholders," he
added. The company would continue its operations while attempting to restructure
its business and debt.
Ricochet supplied wireless internet access at 128kb per second in 15 US cities, but
plans to roll the service nationwide were pulled in February, a decision that led to
the departure of the then chief executive Timothy Dreisbach. At the end of March
the service had 40,900 subscribers compared with 34,000 at the end of December.
The company is understood to have had about $150m in cash on its books,
compared with about $315.8m at the end of March. In June 1999, Worldcom, the
US telecoms group, and Vulcan Ventures, the venture group of Paul Allen, the
co-founder of Microsoft, each invested $300m in the company.
They respectively own 33 per cent and 43 per cent of the company, which at its
peak had a market capitalisation of more than $32bn.
The group also has about $300m in outstanding bonds. Last month, Moody's
Investors Service downgraded the company's debt to Ca, a level reflecting high risk
of default.
Last month, Sierra Wireless, a Canadian supplier to Metricom, slashed its earnings
forecasts and warned that its customer could go out of business. Sierra Wireless'
shares fell 6.2 per cent to $17.09 on Monday.
Metricom shares peaked in January 2000 at $103.50. Before it was suspended on
Monday, the stock was trading at $1.82. Last month, the group announced its
second round of redundancies, cutting 139 workers, or 23 per cent of its staff,
reducing its workforce to 415.
This had helped reduce its burn rate to about $12m a month. During the first
quarter, the company posted a net loss of $186m on revenues of $3.5bn.
Murphy Sheneman Julian & Rogers, the San Francisco-based law firm, has been
hired as reorganisation counsel for Metricom. |
