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Telephony/UC/Collaboration


Business News – Global Crossing Issues GlobalCenter Tracking Stock

  • Written by Channel
  • August 31, 2000

Posted: 09/2000

Business News

Global Crossing Issues GlobalCenter Tracking Stock
By Ken Branson

Global Crossing Ltd. (www.globalcrossing.com) has filed a statement with the Securities and Exchange Commission
(www.sec.gov) in preparation for issuing a tracking stock for its GlobalCenter Inc.
(www.globalcenter.com) Internet service and web-hosting unit.

During the spring, Global Crossing announced it was considering offering GlobalCenter as a tracking stock. The move comes a week after the company agreed to sell its LEC operations to Citizens Communications Co.
(www.citizenscommunications.com) for $3.65 billion in cash.

The move also follows a widely reported attempt to sell GlobalCenter to Exodus Communications Inc.
(www.exodus.net) for a reported $6.6 billion. Published reports say that deal foundered because of the price. Neither company would confirm the discussions publicly, but the possibility had some observers scratching their heads.

Lynda Starr, vice president of U.S. carrier research at Probe Research Inc.
(www.proberesearch.com), says she understands why Global Crossing would want out of the local exchange business; it’s steady revenue, but it’s slow growth and heavily regulated.

“But why they would want to get rid of GlobalCenter is a baffling mystery,” Starr says. “That would put them back to where they started. They’d still have the optical network, the frame relay network, but it would be pretty ridiculous to get rid of the web-hosting business.”

Global Crossing started as a globe-girdling arm of fiber optic cable. It has built, and continues to build, a series of high-capacity undersea cables linking Europe, Latin America and the Caribbean, North America, and the Pacific Rim.

Frontier Corp. bought GlobalCenter in 1997 for its national Internet backbone. Global Crossing then acquired GlobalCenter as part of its $10 billion merger with the former Frontier Corp. in September 1999.

By last September, GlobalCenter counted such big-ticket companies as The Washington Post
(www.washingtonpost.com) and Yahoo! Inc.
(www.yahoo.com) among its complex hosting clients.

According to the statement Global Crossing filed with the SEC in July, GlobalCenter has about 500 customers of all sizes, but weighted toward the high end. It has 10 data centers (which it began building in its days as a Frontier subsidiary) in the United States and overseas, with 10 more being built. GlobalCenter, which had revenues of $7.9 million in 1997, saw them jump tenfold to $70.9 million in 1999.

Bill Hahn, research analyst at Dataquest Inc. (http://gartner4.gartnerweb.com/dq), says the possible sale of Global Crossing is less mysterious to him because, as he understands the deal, Global Crossing would have retained a 25 percent interest in GlobalCenter. This would have allowed Global Crossing a share in the revenues.

But the tracking stock is a better idea, Hahn says. “They’re better off. In fact, I dare to suggest that they might not have been serious about the offer [from Exodus] in the first place.”

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