Covad Set To Emerge From Bankruptcy

powerlord writes "All of us still rooting for Covad can let out that deep breath we've been holding. According to an article on the Seatle IP Wire Covad is set to emerge from bankrupcy. They claim they've managed to shed most of their debts and are concentrating on 50 major metropolitan areas right now. They expect 40 of the markets to be cash positive by year end, with the entire company cash positive by mid 2003. Their stock rose $0.75 to $1.39."

Congrats, but

[Erasei]

I worked with a company that partnered with Covad a few years ago. With any past partner, you wish them the best, and hope they do well as a company.

But the reason (well, one of the many) reasons they went bankrupt in the first place was the old problem known as 'the last mile'. In the DSL world, the telco still has to be involved. So, how can a company like Covad, basically a reseller, expect to survive against the telco selling DSL themselves?

Amazing!

[chill]

"Covad said it has learned from the past and will not expand until it can afford it. Currently, its service area is focused on the top 50 metropolitan areas in the United States.

By the end of this year, 40 of Covad's 50 operating areas will be profitable. The entire company is expected to be cash-flow positive by the second half of 2003."

Amazing that a "new economy" company is now focusing on earning and profit instead of growth. Who'd a thunk it.

Was debt the problem?

[ManualCrank Angst]

I thought the problem was the telcos screwing them over with feet-dragging. Unless bankruptcy (please note the spelling) has changed since we covered it in Social Studies, it doesn't force other businesses to start playing fair.

Reselling CAN be profitable.

[Tsar]

So, how can a company like Covad, basically a reseller, expect to survive against the telco selling DSL themselves?
One word—volume.

All kidding (well, most kidding) aside, I recently saw an article [isp-planet.com] referenced on DSLReports [dslreports.com] that makes an excellent point—in general, DSL customer service sucks. Installation can be time-consuming without a guarantee of eventual success, service is occasionally spotty, and online help can be hit-or-miss. Work-at-home folk who depend on their broadband for their livelihood, as well as those of us who are just willing to pay a bit extra for good service, would likely do business with a reseller who would wrap a telco's DSL line in better support for a slightly higher monthly fee.

On the other end of the spectrum, a reseller could purchase DSL service wholesale and provide stripped-down service (no email, Usenet, or toll-free support) for less than the full-service products offered by the telco. Many of us geeks would go ga-ga for such a service, especially if all extra services (such as static IP's) were offered a la carte.

Proud owner of a self-restored 1968 Ford Fairlane, 302 V8, 9" 4.11 geared...
Self-restored? Wasn't this the setup for a Stephen King novel?

Re:80% isn't enough?

[ProfDumb]

They expect 40 [out of 50] of the markets to be cash positive by year end, with the entire company cash positive by mid 2003.

Either there's some interesting accounting going on, or they'r expecting to lose *lots* of money in the remaining 10 markets -- like over four times as much as the average profit from the profitable markets.

I bet you are right about the accounting. The probably have a lot of centralized costs that they don't allocate out to individual markets. These might include (re-financed) debt, marketing, management, etc. In that case all of their markets could be profitable and yet the company could be unprofitable over all.

Monopoly playing off trusted name?

[Anonymous Coward]

Does it bother anyone that a big phone monopoly like SBC [techcentralstation.com] is funding Covad now though?

Learned their lesson?

[YouAreFatMan]

"Covad said it has learned from the past and will not expand until it can afford it."

And it took how long and how much wasted money to realize a principle that a 8 year-old with a lemonade stand has figured out?

On the plus side for Covad, they managed to outlast their competition both on the DSL side (Northpoint, Rythms) and cable (Excite), so they've got the opportunity for a bigger share of the pie, and a better chance of staying afloat.