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FDC SQUAWK BOX - CEO - Interview
Dec 29 1998 18:05
<Show: CNBC/DOW JONES BUSINESS VIDEO>
<Date: December 29, 1998>
<Tran: 122900cb.Y51>
<Type: INTERVIEW>
<Head: SQUAWK BOX - CEO - Interview>
<Sect: Business>
<Byline: Ron Insana, Mike Norman>
<Guest: Doug Hanson>
<Spec: Business; Internet Industry; RMII (Nasdaq); SIC: 7379>
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT
BE IN ITS FINAL FORM AND MAY BE UPDATED.
RON INSANA, SQUAWK BOX ANCHOR: Internet stocks once again stole the
show on Wall Street yesterday, many logging double-digit gains, in some
cases triple digit percentage gains. National Web solution and e-
commerce company Rocky Mountain Internet (RMII), no exception. The
company, RMI, tacked on more than 13 points, a better than 100 percent
gain to close at 25 and change and was up significantly from a low of 1
7/8. It's up a couple more dollars this morning. The company has
under its belt than a dot com, offering everything from paging and voice
mail to local and long distance phone services. But with e-commerce, the
name of the game these days, can the company' hold on, hold its own in
fact, in what's becoming a crowded home field. Joining us now to talk
about all that is Doug Hanson. He is chairman and CEO at Rocky Mountain
Internet. Mr. Hanson, good to see you. Thanks for being with us today.
DOUG HANSON, CHAIRMAN & CEO, ROCKY MOUNTAIN INTERNET: Good morning,
thanks for having me, Ron.
INSANA: You do a bunch of different things in this business. Can you
define your business strategy here going forward?
HANSON: Well, I think we have two strategies. We have the e-commerce
solution strategy with our e-commerce product called E-sale. And we're
full solutions Web-based, full solutions provider where we can go into a
small, medium sized business, create a web page, host a web page, market
the web page through our search engine called info highway, and create a
commerce solution through our product called E-sale. So we're a full
solutions provider. And then we have the service side of the business,
whereby we can offer a customer local dial up access as well as
dedicated access. And when you're into a business, small, medium size
business, you have their attention, we also have the long distance and
local exchange services. Having come out of that business, from QWest
(QWST), naturally it gave me the desire to get back into the long
distance business and what's the Internet anyway besides a long distance
business?
INSANA: Right. Let me ask you questions about your finances. As
recently as December 16 of this year The Denver Post described your
company as being cash strapped having to forego an acquisition of
another firm because you could not complete a $175 million high yield
debt offering. Admittedly, that was a tough time to attempt such a debt
offering, but you did subsequently raise $13 million in a private
placement. How are your finances right now?
HANSON: Well, finances are great now as a result of this private
placement. We had, we received $8 million with a $5 million additional
commitment. So we're on solid ground financially now. Obviously can't
go out and do the things we would like to do through acquisitions using
funds that we would have obtained from the high yield debt offering. But
who knows. The high yield debt offering may come back in the spring.
We'll get out there and be able to get that kind of funds to start
consolidating the marketplace again.
MIKE NORMAN, GUEST HOST: Doug, Mike Norman here. Hi.
HANSON: Hi, Mike. How are you?
NORMAN: OK, fine, thanks. So does this mean that your strategy moving
forward will rely less on acquisition and more on internal growth?
HANSON: Well, I've always had a strategy. I think you need both Mike.
I think you need organic growth as well as acquisition growth. I mean
you've got 5,000 ISP, smaller ISPs out there so you need to go out there
and acquire the customer base through acquisitions, but you also need an
organic growth plan as well. And we have both. Obviously we don't have
a lot of funds. We've been using our stock. We've acquired four
companies in the last 45 days using our stock as our currency. We would
prefer using cash. We don't want to be any more dilutive than possible.
So if we could get a high yield debt offering done, we would then use
that cash to go out and consolidate the industry.
INSANA: I know this is a heretical question to ask when it comes to
asking about the future of a Internet company but when do you plan to
actually earn money?
HANSON: So when do these Internet companies have to earn money? No.
INSANA: With the stocks going up, maybe you don't want to.
HANSON: Once you're profitable, then you have to have a quarterly
profitability test. But no, I think for us, it's just around the corner.
In the communications industry we're volume sensitive. That first
customer is your most expensive customer, your one millionth customer,
your least expensive customer. The question is where is the crossover
point?
INSANA: Do you know?
HANSON: And for us, no you don't and no one ever knows exactly. I
would hope that 1999 would be a year to show profitability for RMII.
Certainly we're looking toward that. One of the bigger problems we have
at Rocky is getting out of this regional concept. We bought a company
called Data Exchange that is now a nationwide company. I would ask you
guys the question. Do you think Rocky Mountain Internet, the name
itself is it too regional to be a national recognized Internet provider?
INSANA: Well, depends on how successful you get. At some point it doesn't matter, right? Unfortunately, that's all we have time for, Mr.Hanson good to see you, thanks for being with us.
HANSON: Glad to be on.
INSANA: Sure thing. Doug Hanson is the chairman and CEO at Rocky
Mountain Internet joining us today from Denver.
END
(Copy: Content and programming copyright 1998 CNBC/Dow Jones Business
Video, a division of CNBC/Dow Jones Desktop Video, LLC. No portions of
the materials contained herein may be used in any media without
attribution to CNBC/Dow Jones Business Video, a division of CNBC/Dow
Jones Desktop Video, LLC. This transcript may not be copied or resold
in any media.)
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