Worry? Not at Global Crossing
Most people in John Legere's shoes would be feeling a little glum right now. The CEO of telecom provider Global Crossing has seen his company become the fourth-largest corporate bankruptcy in U.S. history. The Securities & Exchange Commission is conducting an inquiry into its accounting. And Legere has been called before Congress to testify about, among other things, the tens of millions of dollars in compensation he earned as Global Crossing's stock collapsed.
Legere isn't one to mope or hide, however. The 43-year-old former head of international operations at Dell tells BusinessWeek Online that Global Crossing's prospects have never looked brighter. "When the music starts playing again, we'll be the best-positioned company around," he insists.
There could still be something of an encore, at least for Global Crossing's creditors. The company is hammering out final details of a $750 million buyout offer from Hutchison Whampoa and Singapore Technologies Telemedia, with a deadline of reaching an agreement by May 21. After that, competing bids are expected to emerge. Legere says more than 60 entities have requested financial information, the inquiries ranging from large, well-known telecoms seeking expansion to investment firms looking for a good deal. A federal bankruptcy judge is expected to choose the highest and best offer by July 8.
Legere says his efforts to restructure Global Crossing are going better than expected. The number of employees is down to 5,000 from 7,000 in early March. He has closed 181 facilities deemed to be unnecessary to core operations, producing a savings of $100 million a year. Total operating expenses, originally budgeted at $2.1 billion for the year, have been cut to $720 million. Capital expenditures have shrunk from $3.2 billion in 2001 to $200 million in 2002, Legere says.
Yet, all of that cutting -- in addition to the company's spate of bad publicity -- has had little effect on customer service or sales, Legere says. The company signed 475 new contracts in the first quarter. "We actually made, to a dollar, our revenue target," Legere says.
YET TO BE CONVINCED.
According to Legere, Global Crossing will emerge with a much lighter debt load -- and do so at a time when its competitors are still wrestling with their own restructurings. He looks around at Global Crossing's rivals: Level 3 is planning to sell parts of its network. WorldCom has a ton of work ahead of it. Same for Qwest and AT&T.
"We've made it though the worst," Legere says. "We protected 200-plus cities in our network. We are going to emerge from this at a time when our competitors are just waking up." Still, Global Crossing lost $153 million on sales of $738 million in the first quarter, and some analysts doubt that it will ever be profitable.
"What they are selling is the most commoditized portion of the business," says Robert Rock, a telecom analyst at John Hancock in Boston. "There's a ton of capacity out there." Adds Paul Wright, a telecom analyst at fund manager Loomis Sayles: "Even if you have no debt, you aren't going to make it. The amount you have to spend on capital expenditures is more than you get in return."
Legere may be optimistic, but Global Crossing isn't out of the woods yet.
By Christopher Palmeri in Los Angeles