dcsimg
RealTime IT News

ICG Com Gasping for Air as Executives Flee

A few hours after it pledged to overhaul its business plan to compensate for network outages and dismal sales, ICG Communications Inc. accepted the resignations from three key executives.

Quitting without explanation were Chief Executive Officer and Chairman Carl E. Vogel and fellow board members Gary S. Howard and Thomas O. Hicks, the firm announced in a statement issued Tuesday.

What makes the moves even more interesting is that Vogel, Howard and Hicks had been in their positions less than a month before stepping down. Vogel had taken over for J. Shelby Bryan as the skipper while Howard, executive vice president and chief operating officer of Liberty Media Corp. and Hicks, chairman and CEO of Hicks, Muse, Tate & Furst Inc., had joined as consuls.

Clearly the three could not see the ramifications of serious network outages, announced by Bloomberg News only days prior to their joining ICG in those capacities.

The troubled firm said the following in a press statement Monday:

"ICG has experienced significant customer service issues within certain segments of its Internet Remote Access Service, business that represents a significant portion of its revenues. These issues have involved, among other things, network outages, equipment failures and technical difficulties."

The result is that major customers said they would withdraw as ICG clientele, or at the least, slow their service orders, if the turmoil was not resolved.

Hence ICG's revised business plan, announced Monday. It calls for controlled expansion, quality of service enhancements and cost savings. The firm previously had anticipated net line additions of approximately 470,000 lines in the third and fourth quarters of 2000 and approximately 1,000,000 lines in 2001. The revised business plan provides for net line additions of approximately 125,000 lines during the second half of 2000 and approximately 500,000 to 600,000 lines for the year 2001.

ICG had anticipated revenues of more than $400 million and approximately $60 million of EBITDA for the third and fourth quarters of 2000. The revised estimates are for approximately $300 million of revenues and negative EBITDA of approximately $25 million during the same period.

ICG Communications spokesperson Kate Varden said the firm was not commenting on the latest developments Tuesday afternoon.

Pat McGrew, of e-consulting firm McGrew + McDaniel Group Inc., said the situation looks like a lot of similar situations in the industry, where over expansion in a chaotic manner has lead to quality of service issues.

"Executives are turning over in a lot of service providers because they did not realize the vast issues of over expansion," McGrew said. "They saw the contracts and the cash and not the investment required to maintain them.

"Any executive who steps into a job without performing their own due diligence (talk to some happy customers, talk to some unhappy customers, talk to tech support staff) gets what they get in the revolving door of high tech companies!"

Indeed, the stock plunged 58 percent Monday when investors got wind of the revised business plan statement. The stock has fallen 91 percent this year.

William S. Beans, Jr., will continue as president and COO of the company. Beans will be responsible for the day-to-day operations of the company and will report to what's left of the executive committee of the board of directors.

The firm is also seeking a lifeline of funding and said its revised business plan places it at risk of defaulting on certain obligations under a $200 million bank loan unless it obtains waivers.