Bankruptcies Hit Hard

As WorldCom's fictitious earnings top $7 billion, the red ink is also mounting for its service providers and partners. Each new earnings report from a telecom or data center services provider adds to the pile of receivables left in limbo by WorldCom's bankruptcy filing. It's amounting to a huge challenge for those providers trying to stay out of Chapter 11.

Qwest assessed its WorldCom exposure at $119 million. The numbers are smaller at hosting and interconnection companies, but they often represent a bigger chunk of the revenue stream. Digex set aside a $12.5 million provision for hosting services sold through WorldCom's channel - representing about 27 percent of its hosting revenue.

Its not just WorldCom, either. Equinix took a $1 million hit from the Chapter 11 filing by Teleglobe, which had agreed to buy surplus equipment from Equinix. The bankruptcy court is now sending the equipment back to Equinix, which will try again to sell it but in the meantime will write down the entire $1 million to be fiscally prudent.

Universal Access saw its revenues decline $5 million - equivalent to a 17 percent revenue hit - following the bankruptcy filings by WorldCom and Metromedia Fiber Networks, its two largest customers.

These are only the publicly-held companies that have to report their exposure. Similar stories are undoubtedly accumulating among privately-held service providers and landlords. As the pain spreads, there's a ripple effect as companies cut costs to get more mileage out of their dwindling revenue streams.