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Prism Goes Out Of Business

Another competitive local exchange carrier has bit the dust, as Comdisco, Inc. , announced Tuesday its intentions to pull the rug out from its subsidiary Prism Communications, Inc.

The move comes only months after Comdisco acquired the competitive local exchange carrier (CLEC) to provide low-cost communications services for its corporate customers, as well as cash in on the lucrative high-speed Internet gold rush with small businesses and consumers.

But it's back to reality for both companies.

The news was expected by Prism, who came to the conclusion it could not compete as a stand-alone business, and plan to close its doors at the end of the year.

The CLEC will continue to provide voice and data services to its existing customers with a skeleton crew of employees, transferring them to other telecommunications providers by the end of the year. All marketing and sales efforts have been stopped.

James Cunningham, Prism chief operating officer, said it's just clean up work now as it settles business with its employees and sells off equipment and customers.

"It is with great disappointment that we at Prism will be winding down our operations," Cunningham said. "Prism anticipates meeting all employee obligations and will work to address creditor claims in an appropriate manner. Prism has retained an outside financial advisory firm to advise senior management and to assist in the implementation of the wind-down of Prism's business operations.

Nicholas Pontikes, Comdisco president and chief executive officer, said a tight marketplace is the reason for the withdrawal, but investors should not be alarmed.

"Problems prevalent throughout the industry, such as lack of provisioning and the significant valuation changes the telecommunications marketplace has experienced over the past few months, required us to review our investment in Prism," Pontikes said. "On July 26, 2000, we announced that we had engaged investment bankers to review strategic alternatives for our investment in Prism. After an extensive review of the strategic alternatives available to us, we have decided to cease funding Prism's operations."

Trouble has been brewing with Prism all year. Despite flagging sales, it scraped enough money up for a marketing blitz to get its trademark "Red Means Go" slogan out to the country. Capped by an advertisement on the Super Bowl, which go for around $1.5 million for a 30-second spot, the campaign fizzled.

From there, it was all downhill. Pontikes and Cunningham both blame incumbent local exchange carriers like Qwest and Ameritech for Prism's dismal year.

"As with the rest of the industry," Cunningham said, "we were hindered by incumbent carriers."