|
PSINet tumbles on news
|
 |
November 2, 2000: 4:18 p.m. ET
Internet carrier announces 4Q warning, executive resignation, restructuring
|
NEW YORK (CNNfn) - PSINet Inc.'s stock tumbled Thursday after the Internet carrier reported a stream of disappointing news, namely a need for a company restructuring, the resignation of its chief operating officer, and a warning of weaker-than-expected fourth-quarter results. However, the company posted a narrower-than-expected loss for the third quarter.
 The news sent PSINet (PSIX: Research, Estimates) shares tumbling in midday trading Thursday, $3.72, or 55.4 percent, to $3.
For the third quarter, PSINet posted a loss, excluding items, of 95 cents a share, less than the Wall Street consensus estimate loss of $1.28 a share.
In the third quarter last year, the company reported a loss of 68 cents a share. [205WAV] or [205AIF]
Revenue for the quarter was $352.5 million compared with $140.6 in the prior year.
 For the year's first nine months, PSINet reported a loss of $3.11 a share. Revenue rose to $843.2 million from $369.3 million a year earlier.
The company also announced a reorganization, and said Harold S. (Pete) Wills has resigned as president and chief operating officer. PSINet also said its board is searching to fill two vacancies.
"Current market conditions are quite challenging, as the slowdown in Internet spending becomes more apparent every day. PSINet needs to take clear and decisive steps to preserve and enhance value for our shareholders and bondholders," said William Schrader, PSINet chairman and chief executive officer in a statement.
In an conference call with analysts, Schrader elaborated on his view that spending on the Internet has decreased.
"It is unfortunate that the market value of e-commerce companies has declined significantly," Schrader said.
 "I believe this is tied to a recession, maybe a mild recession, but a recession in that the amount of revenue reported by telecom suppliers and dot.com companies will be lower," Schrader said.
The company would not give forward-looking guidance, but did say that its internal forecasts suggest that fourth-quarter results could be lower than expected. PSINet said it will release guidance after undergoing a financial and operational review, to be completed by February 2001.
"We have taken a number of steps to reduce our cash requirements," said Larry Hyatt, chief financial officer. "These include reductions in planned capital expenditures of between $100 million and $200 million, and the identification of a number of assets and businesses for sale."
Following PSINet's earnings release, Merrill Lynch analysts Tom Watts and Timothy Abbott downgraded the stock to a "neutral" rating and said that the company faces "significant liquidity challenges and appears to have gone into survival mode."
"Although PSINet currently has more than $1 billion in cash, it is currently consuming more than $500 million per quarter," the analysts noted in a research report. "Management indicates funding needs of $600 million for 2001."
Analysts at Jefferies also downgraded PSINet to a "hold" rating and slashed its price target to $4 a share. 
|
|
|
|
|
|
PSINet
|
Note: Pages will open in a new browser window
External sites are not endorsed by CNNmoney
|
|
|
|
 |
|
