The Broadwing Broadband Deal
It is generally a bad idea to own a business that competes with many of your potential customers.
However, this is a special time when the ultra-long-haul optical is almost dead. So it is a non-issue - offending your potential customers or not. And the ownership of the Broadwing Broadband business won’t hurt Corvis’ chance of getting the government GIG BE contracts, of which CORV is included in the short list.
On the other hand, Corvis bought the Broadwing Broadband business, led and run by telecom industry veteran Jerry Kent, who will be CEO of the subsidiary - - “stripping away $2.5 billion or so in debt”.
The newly Corvis-owned 18000 miles of working fiber is roughly equivalent to the routes of Level III. Note that LVLT has a market value of $2.1 billion that is more than 3 times of CORV’s and LVLT has a stunning Debt/Equity ratio of 20!
Additionally, the broadband business is a perfect showcase for the most advanced technology Corvis has been developing.
With the wide spread deployment of DSL/Cable broadband services and the growing popularity of MP3 music downloading, Wi-Fi, and other rich-media applications – videoconference, video-on-demand, HDTV, remote-storage deployment, the Broadwing Broadband business might become a cash cow for Corvis before its optical network equipment business improve and fully recover. By then, I’d bet that CORV would spin-off or completely split with the services business – a scheme that makes business sense. |
