Hayes going out of business

The struggling modem maker is forced to abandon hopes of emerging from bankruptcy, shutting down operations to prepare for liquidation.

Struggling modem maker Hayes Corporation was forced to abandon hopes of emerging from bankruptcy and yesterday shut down its operations to prepare for liquidation.

Hayes, a pioneering personal computer technology company which scrambled out of a 1996 Chapter 11 bankruptcy and reorganization, could not turn the tide for a second time.

"The bank said it would only fund a liquidation and not our ongoing operations," said Ron Howard, who served as chief executive up until yesterday.

NationsCredit, which led a consoritum of asset-based lenders, provided interim financing to the company after it filed for Chapter 11 last October. But as Hayes burned through the interim financing, NationsCredit was not willing to provide additional working capital.

"For awhile, they've given the indication that they weren't happy with the situation and wanted to pull the plug," said one former executive, who asked not to be identified.

"There were discussions of selling the company as a whole or breaking it up," the executive said. "We had discussions with both types of buyers, but there were a lot of things still up in the air."

Howard said talks with prospective buyers interested in buying the whole company were held as late as last night. The former CEO would have preferred to sell the entire company as a going concern, rather than one whose operations had been shut down.

"The bank's approach will not realize substantial value, unless they change their course quickly," he noted. "There are ways to liquidate a company and still produce substantial value."

When the company had filed for bankruptcy protection last year, it sought to refocus its business strategy and operations. At that time, Dennis Hayes, the company's founder, stepped down as chairman in favor of Howard, but remained on its board.

Despite inventing the PC modem, Hayes has struggled to master the more lucrative business of communications equipment, such as remote access servers and high-speed digital subscriber line (DSL) and cable modems. 3Com's U.S. Robotics has remained the dominant player in the analog modem business, despite its own difficulties over the past few years.