Paging Network: Returning from the Dead
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Many years ago, I had a pager from Paging Network. I loved it. However, when I got my cell phone, I really had no need for the service. So, I cancelled my subscription.
The results have been grueling. In the past year, the stock was as low as 19/32. Then last Thursday, a sleepy paging company called Metrocall (MCLL) surged 4-3/32 to 6-3/32. The company got a $51 million investment from PSINet (PSIX), Hicks, Muse, Tate & Furst Inc. (an investment bank) and Aether Systems Inc. (AETH). What's more, AT&T Wireless became the company's biggest shareholder.
What's happening? With wireless exploding, paging companies are looking very attractive as vehicles to get subscribers. As for Metrocall, the company has six million subscribers. The company also has a seasoned management team and strong in-house technologies.
Yes, the company has a substantial subscriber base: 9 million (in all 50 states, as well as Puerto Rico, the Virgin Islands, the District of Columbia and Canada). The technology is also top-notch, offering such things as two-way wireless e-mail and global messaging.
However, before you jump in, it's worth taking a look deeper into the financials. Basically, the company is insolvent. The company recently announced that it was unable to pay interest on notes due on Feb. 1, 2000 (about $33.6 million). Because of this, there will be an adjustment for the merger between Paging Networks with Arch Communications. They are the two biggest paging companies (the combined entity will have 16 million subscribers).
Basically, Paging Network is spiraling into oblivion. In its fourth quarter, the company had a loss of $49.5 million, compared to $16.4 million in the same period a year ago.
In the event of a bankruptcy, shareholders are last in line to receive any proceeds of a liquidation. This is a prospect that Paging Network definitely faces. Thus, it would be scary for another company to buy Paging Network right now; rather, it would make more sense to wait and let the stock fall -- picking-up the pieces in a bankruptcy court.