Adam Eisner, theWHIR.com
April 2, 2002 — (WEB HOST INDUSTRY REVIEW) — Managed hosting firm Digex said in its annual report yesterday that while the company was fully funded for 2002 as a result of funding from WorldCom, it would likely require additional cash in the future in order to sustain company growth.
“We have incurred significant net losses and operating cash flow deficits since inception,” the company said. “We expect to continue experiencing negative cash flow from operating and investing activities.”
Digex currently receives the majority of its funding from WorldCom, a major telecommunications firm. WorldCom purchased communications giant Intermedia, Digex’s former parent company, in a $3 billion dollar deal that was completed last summer.
“WorldCom is our majority stockholder, primary lender, significant channel partner, and one of our largest vendors,” the company said. In 2001, WorldCom channel customers accounted for 171 of the company’s 600 clients, and approximately 660 of Digex’s 3,588 total managed servers were sold through WorldCom sales channels.
Digex said its 2002 business plan could require up to $276 million, which WorldCom is under agreement to help fund. However, the company warned that WorldCom had no obligation to continue funding the company after 2002. “Should we require additional funding beyond 2002, as currently projected, there can be no assurance that WorldCom will provide such additional funding,” the company’s filing said. “We believe that funding from any source other than WorldCom on appropriate or commercially acceptable terms is unlikely to be available.”
Digex said it was confident, however, that WorldCom would stay on board until at least 2003, although it could not provide any guarantees. “It is our understanding that WorldCom currently intends to fund our operations and cash flow requirements through March 31, 2003. However, there can be no assurance that WorldCom will provide such funding. We intend to work out a binding agreement with WorldCom to this respect.”
