Alphanet's burning issue is cash. In order to keep going, they're going to need more investment. The size of their loss in the recent quarter indicates a high burn rate. Given the mood of the markets now, further capital may not be easy to come by. The conclusion is not a pretty one....
Below is an article from Reuters by Sarah Edmonds:
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AlphaNet shares lose half their value
TORONTO, Nov 5 (Reuters) - AlphaNet Telecom Inc. shares lost more than half their value on Thursday as investors took a
dim view of the long-distance provider's capital woes and hefty third-quarter loss.
AlphaNet shares plunged C$4.15, or 55 percent, to C$3.35 in turnover of 296,750 shares on Thursday morning.
The company provides international long-distance services to wholesalers by putting voice signals over data networks. It
posted a third-quarter loss of US$10.5 million, or US$0.98 a share, compared with US$7.3 million, or US$0.70 a share, in
the year-before period.
More disturbing to analysts, the company said it would need about US$25 million in additional capital in 1999.
''Their earnings were down and I think they have not done as well as anticipated,'' said Ian Angus, president of Angus
Telemanagement Group.
''The fundamentals are in place and we believe the outlook for AlphaNet is positive,'' President and Chief Executive Andre
LeBel said in the earnings statement on Wednesday. ''However, in this phase of our growth cycle, further capital is required to
fund the continued expansion of the network, grow the customer base and meet current working capital requirements.''
AlphaNet has hired Chicago-based investment banking firm Resource Financial Corp. to explore ''strategic alternatives'' for its
hospitality business unit, which provides fax and communications services to hotels.
''When their earnings came out, they were looking bad and they said they've got to raise more capital to survive. That's not
usually a good sign,'' said one analyst.
''Their earnings were poor. They lost 98 cents in the third quarter. Their revenues have been slow to show up. The earnings
are weak and they say that they need more money, they need additional funding of at least C$25 million.''
The stock fell C$4, or a whopping 53 percent, to C$3.50 in turnover of 281,450 shares on the Toronto Stock Exchange.
Angus said the fast-changing telecommunications market claims many victims and the stock market does not like any
company's earnings to fall.
''At some level, I think you could almost say that the stock market expects everything to succeed and the realities are that there
are so many new things happening and so many experiments going on with either technologies or market approaches, that
we're quite certainly going to see more failures than successes,'' Angus said.
''I'm not saying that Alphanet isn't going to succeed -- I have no reason to think that they won't. But the realities are that it's
going to take more than good technology and clever marketing approach to succeed in a business as intensely competitive as
this one and where prices are falling so fast that almost everybody's business plan is out of date the day they issue it.'' |
