snippet from a NY TIMES Business Section Article today -- quite Facinating (HWP/CPQ not mentioned) & interesting - should be read (link at bottom - but you may need an access ID - too long to completely post here)
Telecom, Tangled in Its Own Web
...
Yet while all eyes remain on Enron, a tragedy of identical plot but with far more damaging implications has been playing out on another stage. Unlike Enron's saga, this drama is not about a single, rogue company operating to enrich its executives. This tale is about an entire industry — telecommunications — that rose to a value of $2 trillion based on dubious promises by Wall Street and company executives of an explosive growth in demand for telecommunications services. When that demand failed to materialize, the companies were left with mountains of debt and little revenue.
Now, securities regulators are examining transactions among some telecom companies — Global Crossing and Qwest Communications (news/quote) are two — that may have been designed to pad inadequate revenue. Last week, Congress, too, started an investigation of the telecom mess, looking at how certain companies accounted for the deals they struck with one another and whether employees in the companies' 401(k) plans were treated fairly.
As they dig, they may discover a trait that distinguishes this financial mess from others: the role played by an extensive web of relationships among these companies. Because of many deep and tangled ties, telecom companies were able to show what looked like promising growth in the mania's initial stages. But when demand from consumers and corporate customers of the networks failed to emerge, the ties among the companies exacerbated their declines. When one company failed, other failures became almost inevitable.
It is unclear whether many of these interlocking relationships served any economic purpose. What is clear is that executives had incentives to forge them: by creating revenue, they helped keep the stock price up.
There is no doubt that the mess is large. Since the telecom sector peaked in the spring of 2000, some $1.4 trillion in investor wealth has evaporated, according to one analyst. More than 15 companies have filed for bankruptcy reorganization in the last year or so, including former highfliers like Global Crossing, which made the fourth-largest bankruptcy filing in American history in January, as well as 360 Networks, PSINet (news/quote) and Net2000 Communications (news/quote). Many others in the industry are teetering.
nytimes.com |
