Global Crossing Teams Up With Microsoft and Softbank (Breakfast News) September 8, 1999


Wednesday, September 8, 1999

"Never invest in anything that eats or needs repainting."
-- Billy Rose

Global Crossing Teams Up With Microsoft and Softbank

By Brian Graney (TMF Panic)

Global data network builder and operator Global Crossing (Nasdaq: GBLX) unveiled an agreement this morning with software company Microsoft (Nasdaq: MSFT) and Japan's Softbank to bring the wonders of broadband connectivity to Asia. The venture, which will be called Asia Global Crossing, will initially feature a 17,700-kilometer terrestrial and undersea fiber-optic network connecting Japan, China, Singapore, Hong Kong, Taiwan, South Korea, Malaysia, and the Philippines. The network will be linked to Global Crossing's networks in North and South America and in Europe, providing the important Far East link of Global Crossing's proposed 'round-the-world broadband chain.

As part of the deal, Global Crossing is tossing in its 57.75% interest in the soon-to-be-completed Pacific Crossing 1 trans-Pacific subsea loop. Microsoft and Softbank will each fork over $175 million in cash and have also pledged to buy $200 million worth of Global Crossing network capacity over a three-year period, using primarily the Asian network. Global Crossing will serve as the project's manager and operator and will initially control a 93% stake in the venture. The other two partners will have matching 3.5% stakes to start.

The total bill for the network is expected to be $1.28 billion over the next two years. Besides the cash ponied up by Microsoft and Softbank, the partners plan to raise more money by taking Asia Global Crossing public and by attracting additional partners in the region. Eventually, the plan is to extend the network as far west as Thailand and as far south as Indonesia. By the time that occurs, however, the venture will likely have competition from networks operated by big phone companies such as AT&T (NYSE: T) and others looking to capitalize on the region's growth prospects.

News to Go

Computing products wholesale distributor Ingram Micro (NYSE: IM) said that lower-than-expected U.S. sales, price competition, and reduced vendor rebates and incentives will result in Q3 EPS between $0.10 and $0.14, down from last year's $0.40 and short of the First Call mean estimate of $0.41. The company added that it is looking for a new CEO to replace Jerre Stead, who is relinquishing the post.

Pharmaceutical contract research organization Covance (NYSE: CVD) warned that slowing revenues in its Phase III clinical trial business and a "major" contract cancellation will lead to Q3 earnings of about $0.21 per share (before a restructuring charge), missing the First Call mean estimate by a nickel. The company also said it will shed 150 workers, or about 2% of its global workforce.

Web portal Lycos (Nasdaq: LCOS) announced that it will acquire privately held streaming stock quotes and online financial information service for $78.3 million, plus the assumption of the company's stock option plan.

Fashion clothing designer Polo Ralph Lauren (NYSE: RL) agreed to acquire its European licensee Poloca S.A. for $230 million in cash and assumed short-term debt. The company expects the deal to add to its earnings starting in fiscal 2001.

Lee, Wrangler, and Vanity Fair branded apparel maker VF Corp. (NYSE: VFC) warned that poor sales comparisons, slow retail traffic in mid-tier department stores, and weak European jean sales will lead to Q3 EPS roughly 10% to 15% below the $0.98 earned last year. Analysts surveyed by First Call had called for EPS of $1.01 in the period.

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