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Ardent Files for Chapter 11 Bankruptcy

First, it changed its entire business plan from focusing on broadband services for hotels and apartment communities to businesses. Next it reinvented itself with a name change. The losses continued to mount and, now, Ardent Communications, Inc. -- the former CAIS Internet, Inc. -- has filed voluntary petitions for reorganization under Chapter 11 of the U.S. Bankruptcy Code in the U.S. Bankruptcy Court for the District of Columbia.

After taking a second quarter $182.8 million charge by writing down a significant portion of its capital costs and contract rights associated with its hotels and apartment service, the then CAIS positioned itself to go into the more lucrative business services arena, providing bundled broadband connectivity to businesses around the country. The broadband carrier kept its 17,000 Web hosting customers. In May, CAIS changed its name to Ardent.

Leading the reorganization was Michael Lee, formerly the chief business development officer at TelePacific Communications, who was brought in as president and chief executive officer of the Arlington, Va.-based company. But with a cash balance of only $68.6 million in late December, company officials warned it would need additional capital in the form of investment or debt financing by the late second quarter of this year.

It didn't happen.

"Unfortunately the ongoing downturn in the capital markets, exacerbated by the recent terrorist events, has adversely impacted Ardent Communications as it has on the entire telecommunications and Internet industry," said Lee. "With the lack of funding available in these current market conditions, we needed to be completely self sustainable without outside financing. We are initiating actions, including the filing of this petition, that will enable continuing operation of Ardent as we work to adjust the company's business model, sales strategy and debt commitments."

The company has also announced that it has "substantially" reduced its workforce to decrease its expenditures. Additionally, three of the company's directors -- Alexander Navab, Jr., James H. Greene, Jr., and John K. Saer, Jr. -- have resigned from the board of directors.

According to Ardent, it expects that the company's network and its customers will remain unaffected while under bankruptcy protection.

After taking over the company's leadership, Lee said he quickly realized that CAIS had a lot of bandwidth to throw around nationwide but wasn't getting it out to the right customers.

"There are only a few nationwide independent services providers that can boast of a data network of this size and flexibility," Lee said. "As we reassessed the company's business strategy in light of current market conditions, CAIS' status as a tier-one ISP revealed a significant opportunity to expand its customer base and enable the company to achieve positive cash flow."

A Tier 1 provider with OC-3 to OC-12 lines traversing the country from West to East Coast, the carrier was having a very difficult time keeping its state-of-the-art network lit up with data.

Ardent says it still believes its network is "significantly" underutilized, presenting both wholesale and retail opportunities for Ardent to continue to grow its business and maximize value.

"We were in the midst of restructuring before we filed Chapter 11, and were successful in many aspects of the process, including reducing network and administrative costs and increasing revenue and target margins," Lee said. "We are still executing to this restructuring plan. However, with recent events, we have now chosen to continue this process under the protection of Chapter 11 as a path to ensure long term viability and maximize value."

Ardent's nationwide network has been fully Multi-Protocol Label Switching (MPLS) enabled. The firm also picked up 1,947 former PSINet business DSL subscribers. It has completed the conversion and provisioning of those subscribers.

MPLS is an emerging protocol that enables the creation of virtual tunnels through an IP network. This in turn allows for faster routing of traffic through the network and the ability to route traffic around network congestion. It also enables the establishment of classes of service, where data traffic from a particular user or IP address is given priority through the network over other data streams (determined by advanced service level agreements). Ardent can also go further by marking each packet by its application and then giving priorities to particular applications.

Ardent's network currently serves 38 major markets with a fully redundant OC-12 and OC-3 coast-to-coast network. It has dual Cisco 12000s and dual Cisco 7200s in each of its 29 POPs -- 13 POPs have many more 7200s.

According to Lee, the company has always been a successful ISP, though that point has remained hidden. In fact, about 90 percent of Ardent's revenues have come from the ISP side of its business.