Paging Network: Returning from the Dead

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.

At one time, Paging Network (PAGE)
was on the fast-track for high-growth companies. Unfortunately, many
of its users did what I did: They dumped the service.

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.

The news has propelled the stock of Paging Networks. Yesterday, the stock
soared 1-13/32 to 3-1/2. About 76 million shares traded hands.

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.

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