By Richard McCaffery (TMF Gibson)
March 22, 2000
Internet service provider (ISP) and services company PSINet (Nasdaq: PSIX) went into deeper waters for its latest acquisition, netting consulting firm Metamor Worldwide (Nasdaq: MMWW) for $1.9 billion in stock.
Metamor, a Houston-based information technology consulting and services company, is PSINet's biggest acquisition to date. That says a lot since Herndon, Virginia-based PSINet made 43 acquisitions last year alone.
Under terms of the deal, PSINet will issue 0.9 shares of its stock for each share of Metamor, a deal that values the company at a 165% premium to its closing price of $16 1/4 yesterday. Still, it's only stock, and since when is stock price a proxy for intrinsic value?
As part of the deal, PSINet gets a majority interest in Xpedior (Nasdaq: XPDR) , a newly public company that offers clients business-to-business software and services. This meshes with PSINet's strategy to offer Internet access, Web hosting, and infrastructure services to small and medium-size businesses. The company now has operations in 27 countries on five continents and has a position in the world's top 20 telecom markets.
Focusing on the business customer is a good strategy for an ISP. First, businesses need more bandwidth than consumers. Second, many businesses are looking to have services bundled in with access. Finally, churn rates are much lower in the business market.
PSINet has global reach, its own high-capacity network, and an increasingly rich set of services along with a growing staff of consultants. It has $3.2 billion in long-term debt, but it's also positive on an EBITDA (earnings before interest, taxes, depreciation, and amortization) basis and has $1.8 billion in cash and equivalents sitting on its balance sheet.
News to Go
Memory chip and semiconductor component maker Micron Technology (NYSE: MU) reported fiscal second quarter net income of $161 million, or $0.58 per diluted share, compared to $22 million, or $0.08 per diluted share, a year ago. The company fell short of analyst estimates by $0.20 per share, however, as memory chip prices declined sharply from first-quarter levels.
Diversified banking company Bank One (NYSE: ONE) is considering selling its online banking division WingspanBank.com, The Wall Street Journal reported. Bank One hired Morgan Stanley to review a possible sale.
Supermarket retail chain Albertson's (NYSE: ABS) promoted former Executive Vice President of Operations Peter Lynch (no, not that Peter Lynch) to the positions of president and chief operating officer. The positions have been vacant since June.
