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360networks reports fourth-quarter loss

The telecommunications concern announces a fourth-quarter loss that misses analyst expectations despite the company's 26 percent annual revenue growth.

    Telecommunications concern 360networks on Thursday reported a fourth-quarter loss that missed analyst expectations--despite a 26 percent annual revenue growth--and lowered its 2001 projections for revenue and spending.

    Net losses for the period were $155 million, or 20 cents per share, on revenues of $158 million. That compares with net income of $11 million on revenues of $125 million in the same period in 1999.

    Analysts expected 360networks to lose 11 cents per share, according to a survey by First Call.

    At 1 p.m. PST, the close of regular market trading, 360networks shares finished nearly 3 percent lower at $7.70. The earnings report was issued after the close of regular trading. In after-hours trading, 360networks shares were down less than $1.

    360networks executives reduced cash revenue projections to $2.4 billion to $2.6 billion from $3.1 billion to $3.3 billion for the coming year. The company also reduced its EBIDTA (earnings before interest, debt, taxes and amortization) forecast to $1.8 billion to $1.9 billion from $2.5 billion to $2.6 billion.

    "Despite our strong performance in the fourth quarter, we believe that revising our 2001 cash guidance is a prudent step given the current dynamics in the market and particularly the transatlantic market," 360networks Chief Financial Officer Larry Olsen said in a statement. "We believe that no one in our sector will be insulated from this market reality."

    The company also plans to reduce its capital expenditures by $500 million this year, making it just the latest communications carrier to cut costs, a bad sign for hardware makers who already have been impacted.

    360networks is building metropolitan area networks in 38 markets, but these construction projects are costly. As a result, the company signed a deal with metro gigabit Ethernet service provider Telseon and plans to use metro network services from Sigma Networks.

    "Metro is very expensive. In this tight capital market, we will be very judicious in how we use assets for metro networks and elsewhere in the company," said 360networks Chief Executive Greg Maffei. "More partnerships are in the offing."

    360Networks
    Stock price from March 2000 to present.  
    Source: Prophet Finance
    Regardless of the quarterly loss and reduced financial projections, 360networks executives remain optimistic about their company's plans.

    Executives believe that, except for a trans-Pacific link, the company's 89,000-mile worldwide fiber-optic network will be complete by this time next year. However, executives aren't concerned that too many providers have saturated the market.

    "We do not see a bandwidth glut," Maffei said. "We see no reduction in underlying demand."

    Company executives said tough economic times have befallen the entire communications sector, yet 360networks is weathering the storm.

    "I'm very proud of what 360networks was able to accomplish in 2000," Maffei said. "Few companies have moved as effectively and as quickly in a tough market."

    360networks agreed to buy network operator NetRail last month.

    Revenue for the year ended Dec. 31 rose to $511 million from $360 million in 1999. The company posted a yearly net loss of $355, or 55 cents a share, in 2000 compared with a net income of $24 million in fiscal 1999.