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.”
