Telecom Drudgery

Some folks hate Matt Drudge and The Drudge Report. Others lionize him. But no matter what they may think of him, lots of folks in Washington read him. When he latches onto a story, it often makes headlines.

This may mean a headache for Global Crossing and the telecom sector. Drudge is focusing on Democratic rainmaker Terry McAuliffe's relationship with GX, and drawing comparisons to the Enron scandal. Will Drudge's attention complicate Global's efforts to restructure? It might, and here's why:

Some of Drudge's most attentive readers are journalists covering national politics. They remember the Lewinsky scandal, when the Drudge Report broke many of the most sordid stories -which we then saw and heard on CNN, MSNBC and the major networks shortly thereafter.

Drudge's attention to McAuliffe's Global Crossing ties is likely to prompt close scrutiny from Washington investigative reporters, not to mention members of Congress. Drudge can count on a steady stream of information from GOP strategists eager to deflect attention from Bush administration ties to Enron - who appear to be his primary sources on his initial story on McAuliffe. Journalists who have written about Bush-Enron connections will be reminded of their obligation to work both sides of the street.

If Global Crossing's bankruptcy becomes politicized, the role of foreign investors will be closely scrutinized, which will further complicate the challenge the company faces.

The next few days will likely tell us whether this story has "got legs," as they say in the news business. If it does, we may see the Global Crossing case kicked around on the national stage.

No silver lining in GX filing

What's the worth of a seamless fiber-optic network connecting 200 cities in 27 countries? Pennies on the dollar, it seems.

Few were surprised by Global Crossing's bankruptcy filing. But today's announcement is unsettling for what it suggests about current valuations for distressed telecom assets. Consider that Global Crossing owes $12.4 billion to its creditors, and "values its assets" at $22.4 billion.

Yet under the deal announced this morning, Hutchison Whampoa and Singapore Technologies would be able to acquire a controlling interest in Global Crossing for $750 million. Maybe I'm missing something, but the math is butt ugly. That $750 million figure works out to 6 percent of what Global Crossing owes its creditors, and a measly 3.3 percent of the "asset value" the company reported to the bankruptcy court.

It's hard to look at those numbers and find a silver lining. I can't imagine Global Crossing's creditors will be very excited - and therein lies the rub. Prepackaged bankruptcies can get in trouble if they are perceived as sweetheart deals. An example is @Home, where the terms of a planned sale to AT&T raised the ire of creditors, who ultimately decided that liquidation was a better outcome. Many customers were stranded, and some are still hopping mad about it.

I'm sure it's an imperfect comparison. But it appears that one of two things must be true: either this is a spectacular deal for Global's suitors, or the current market value of an industry leader's worldwide network is 3 cents on the dollar.

Perhaps Global Crossing's management is hoping a stronger bid will emerge. Exodus' management expressed similar hopes when it struck a Chapter 11 deal with Cable & Wireless. Those sweeter bids never materialized.

PSINet Stadium No More

Gone are the days when Internet companies could spend $94 million to emblazon their name across the facade of a sports stadium. In yet another reminder of the passing of the brief but heady technology euphoria of 1999, the Baltimore Ravens say they are seeking a new naming sponsor for PSINet Stadium.

PSINet, a bankrupt Internet service provider, is in the process of selling its assets. The company is unlikely to make any more payments on a 20-year deal. Thus, the Ravens ' loss to the Steelers Sunday marked the end of an era, erasing another fading monument to the Internet moment.

Disaster and Recovery

Let's face it: 2001 was a disastrous year for the data center industry. In 2002, as the industry seeks to recover from that disastrous year, many providers are embracing disaster recovery as the key.

With the colocation market dead in the water and the IBMs and Sprints of the world capturing much of the managed hosting business, what else is left? In the wake of the Sept. 11 terrorist atrocities, disaster recovery figures to be one of the few active growth markets left for data center providers.

This week Inflow and Cervalis ramped up new marketing efforts targeting the disaster recovery market. In its press release, Inflow noted a recent Gartner study asserting that less than 25 percent of enterprise businesses have implemented a disaster recovery plan, and that the remainder "intended to establish such plans in the next three years."

Seventy five percent is a big number. But three years is a long time.

There's no arguing that Sept. 11 prompted a flurry of activity among companies seeking business continuity solutions. But now, four months later, have those knee-jerk reactions evolved into finite commitments for services? Or is the initial excitment easing as companies continue their financial belt-tightening to weather the recession? It may take a while to quantify the real opportunity in disaster recovery (beyond analyst speculations, anyway).