Investors Anxiously Await C&W NewsBy Adam Eisner, theWHIR.com
May 30, 2003 — (WEB HOST INDUSTRY REVIEW) — It seems like not a week goes by recently without fresh speculation over the future of Cable & Wireless.At the heart of most speculation is what the company will do with its enormous hosting unit, which was key to former CEO Graham Wallace’s master plan to turn the company from a major player in the voice market to a hosting and Internet services giant.
Most everyone in the hosting industry knows the story of the company’s progression: to foster these dreams of becoming a dominant player in the high-end hosting industry, Cable & Wireless snapped up Exodus Communications, Digital Island and selected assets of PSINet. But after completing the acquisitions and integrating the firms, the company faced several daunting challenges, including a jittery market and a reeling telecom industry.Which leads to the question on the minds of many industry watchers recently: what will happen on June 4, when Francisco Caio, the company’s new CEO, announces the company’s year-end results? Many suspect a significant announcement will also be made regarding the company’s restructuring plans. According to a well-publicized report in The Times last week, the company will introduce plans at the time of the announcement to divest itself of most of its U.S. and perhaps even its Japanese assets. This would essentially negate the company’s previous plan to build a major U.S. Web hosting and content delivery force – a project the company has invested more than a billion dollars in thus far.Many expect Cable & Wireless to have a difficult time finding buyers for its U.S. interests, as hosting assets are not exactly a hot commodity if not in the form of customer accounts. The Times reported that should the unit simply be shut down, which is reportedly being considered as a viable option by the company, the cost would be approximately £600 million.The company’s recent share price activity indicates that investors appear to be anxiously awaiting an announcement, having pushed shares in Cable & Wireless up significantly since the it replaced its CEO in April, jumpstarting speculation regarding the company’s U.S. and Japanese interests. The value of shares in the company have almost doubled since January, and now hover at close to £1 after slipping under 40 pence last year.Should Cable & Wireless exit the U.S. market, it is expected that the company would return to its original roots and focus on voice, telecom and network services in countries with large British interests. The company has several other interests that have been overlooked since its venture in to hosting. For example, C&W holds the exclusive license for commercial communications Diego Garcia, an island located in British Indian Ocean Territory. Further west, the company is the oldest and largest licensed telecom in Bermuda (where it has been providing services for more than 100 years). And in Bahrain, the company has a hand in the country’s exclusive domestic and international franchise carrier, ISP and mobile franchise operator. In total, the company operates in over 30 markets providing not just voice services, but network and telecom services as well. Some analysts, however, are warning that expectations of a significant announcement could be over-hyped, and that the company might not pull out of the U.S. given the fact that Cable & Wireless appears to want to continue providing network services to multinational firms – which would obviously require a significant U.S. presence. Cable & Wireless could merely announce their year-end earnings June 4 and little else. Regardless, changes to the company’s focus are likely in the works, as Graham Wallace was removed in order to facilitate both a changing of the guard and a larger change in strategy.
