Not a good sign. He wouldn't be talking at all about this if anything was truly active. I'm bailing.
See Kern's comments below. If he isa truly talking w/ someone, he is asking for SEC action.
March 29, 1999
E.spire stock soars amidst takeover talk
William Glanz
Fueled by speculation that it is being looked at by buyers, the stock of e.spire Communications rose 60 percent in the past three weeks.
The stock of the Annapolis Junction technology company is trading near $10; the stock hit a low of $4.31 on Jan. 25. It closed on March 24 at $9.44, a significant increase from the $5.88 closing price on March 1.
Officials at e.spire appear unfazed by the takeover talk.
"We're in the [competitive local exchange carrier] business, and there are a lot of people in the long-haul business, so a lot of people think [a merger] makes sense," e.spire chief operating officer Dennis Kern said in an interview this week. "It's natural to speculate a marriage will occur."
E.spire provides local and long-distance phone service, data, and Internet services to businesses, focusing its efforts in the southern half of the United States. The company has more than 75,000 dial-up Internet and Web-hosting customers and about 13,600 data and voice subscribers.
Qwest Communications International Inc., based in Denver, is the company most frequently tied to e.spire in the takeover rumors. Qwest is the nation's fifth-largest long-distance calling provider.
E.spire is a potential takeover target due in part to its extensive network, said Brian Boyer, vice president of Chicago brokerage firm First Analysis Corp. Unlike many competitors in the crowded telecommunications industry, e.spire is building its own fiber-optic network that includes 35 cities. "They've been around a while now, so they have a lot of investment," Boyer said.
Qwest may want to buy e.spire as a means of penetrating more local calling markets, he said.
Qwest also is an e.spire customer, and speculation about an acquisition of the local company was fueled when e.spire recently leased a portion of its fiber-optic network to Qwest, Boyer said.
But local and long-distance providers often lease their networks to each other, Kern said, so the Qwest deal was nothing unusual.
E.spire also was connected to Qwest when e.spire hired Wayne M. Charity on March 15 to take over as senior vice president and chief information officer. Charity was a Qwest vice president.
Potential suitors sniffing out e.spire will find a 6-year-old company with growing revenues, but still millions in losses. Insiders own about 10 percent of the company, while institutional owners control about 60 percent of the stock.
Annual revenue at the company formerly known as American Communications Services Inc. reached an all-time high of $156.8 million for the year ended Dec. 31, up 166 percent from $59 million in revenues in 1997.
The company recorded a 1998 net loss of $163 million, a 42 percent increase from the $115 million net loss in 1997.
Despite the loss, business is booming, according to e.spire officials.
The company has been busy broadening its services this month, having signed two deals since March 17.
E.spire signed an agreement with Covad Communications Group Inc., based in Santa Clara, Calif., that will enable it to offer a high-speed connection to the Internet using digital subscriber lines to customers in New York and Washington.
E.spire also signed a deal with Herndon, Va.-based PictureVision Inc., a subsidiary of Eastman Kodak Co. PictureVision will use e.spire's Internet protocol backbone and access services, high-speed frame relay, and dial-up Internet access to move digital photos electronically between customer-designated Internet addresses and PictureVision photo developers nationwide. E.spire will replace a group of local Internet service providers and network providers that PictureVision had used.
Customers drop off film at a photo developers participating in the PictureVision program. When the film is processed it is put online. Customers can then view and share their pictures on their computers or e-mail the photos.
If the company's stock value continues to increase, e.spire -- which has never said it wants to be purchased -- may spurn any offer and remain independent, Boyer said.
"If their stock gets as high as $20, they may want to put their nose to the grindstone and stick it out on their own," Boyer said.
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