Channel Surfing Blog 

Kelly Teal

XO Holdings isn’t ‘holding’ up so well these days. Yesterday the CLEC reported a first-quarter loss of $42.9 million – more than the $20.6 million in losses a year earlier. Ongoing losses, combined with the hiring of an investment bank, make XO look ripe for one of three actions: going private; getting bought by a rival; or filing bankruptcy.

I say that for three reasons.

First, companies don’t hire investment banks unless they need to change something about their business model. XO contracted Morgan Stanley as its “financial advisor” in February.

Second, XO’s stock prices keep dropping – today they’re at 55 cents; yesterday they hit 60 cents. The company has been trading on the Over The Counter Bulletin Board – a place where stocks pretty much go to die – since 2003 (I earlier had written since last October but I had my facts wrong).

Finally, XO is carrying a high debt load and it doesn’t look like refinancing will happen any time soon in this credit-crunched market. The debt comes due in April and July of next year.

On the whole, I’m surprised Carl Icahn has let matters get this bad at XO. Maybe he’s been too focused on cleaning up Motorola. Meanwhile, XO plans to spend another $22 million on capex in 2008. If XO doesn’t spend that money, it fears “it would be difficult to continue to compete against the ever increasing pressures from the regional Bell operating companies.” That’s from its earnings info yesterday.

I’m curious to know what telecom and XO insiders think of the situation. I hear morale at the company is, understandably, in the dumps. (Update: An insider tells me morale actually is high, so I'm getting conflicting information) E-mail me with your thoughts; if I write an article, I’ll keep your name and company confidential.

User Comments !

Maybe Ichan needs to pay a little more attention to XO than Yahoo.

Posted by: Victor | May 16 2008 08:05:45

Mr. Unger, Are you this gentleman who said not long ago in an XO document?

Unger underscores that XO Communication is “not just talk.”  Many of its customers have been with the company for the long-term and there is a reason for that.

“We are a business partner, not just a vendor. The key is we listen, and with the full range of voice, data and IP services we can create the solutions that each customer needs, rather than sell pre-packaged solutions,” says Unger.

Posted by: John Glenn | May 18 2008 17:18:26

In light of the recent refinancing of XO holdings, I have to look back on this article and chuckle to myself.  It is interesting that so many nay sayers are quick to jump on the bandwagon of Mr. Icahn's assumed ill intentions to the minority shareholders.  Meanwhile, XO secures $780 million, clears their debt, and the company prepares for the next stage of growth, further solidifying the company as a major player in the CLEC world.  I look forward to more congratulatory articles like, "XO Digs Out From The Debt" posted to Phone+ on 7/29/08.  As an insider with 8 years under his belt at XO, and previously Allegiance Telecom, I am tied deeply to the morale of my market.  I can say unequivocally that we are on an all time high in my market and I hear resounding agreement from my peers.  Customer care is what I and my largest customers consider "best in class", installations have been excellent, leadership continues to be honest, fair, consistent and effective throughout the chain of command,  and we are introducing new and exciting services and enhancements in nearly every department every month.  The company Kool-Aid has never tasted so good or been so nutritious for the XO employee.

Posted by: Forrest Knueppel | July 31 2008 08:57:59