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NorthPoint deal rumors persist

Ongoing rumors suggest that the major DSL-based telecommunications provider may announce tomorrow it is being acquired or has entered into a partnership.

NorthPoint Communications will be a company to watch tomorrow.

Ongoing rumors have escalated tonight that NorthPoint, a major digital subscriber line (DSL)-based telecommunications provider, may announce it is being acquired or has entered into a partnership when the company reports its second-quarter financial results tomorrow.

The company is believed to be involved in a major deal that may include a takeover, an investment, or some other more unusual form of partnership with one or more multibillion-dollar companies. The company's stock has flirted with its 52-week low this summer.

A media representative for the high-speed, or "broadband," provider could not be reached for comment.

NorthPoint leases phone lines from the Baby Bell local phone firms, then sells them as high-speed Internet access lines to Internet service provider (ISP) partners that, in turn, sell them at retail prices.

The company was supposed to report its quarterly financial results July 31 but pushed that date back to Aug. 8 to coincide with the earnings announcement of the company or companies involved, according to sources familiar with the company's plans.

Verizon Communications, made up of the former Bell Atlantic and GTE, is scheduled to report its quarterly financial results tomorrow. Verizon representatives could not immediately be reached for comment late tonight.

NorthPoint's lengthy stock slide has contributed to the rumors, as has ongoing speculation that links the Baby Bells, upstart fiber-optic carriers, Web hosting firms and others in a complex web of rumored deals.

Several media outlets have reported that Global Crossing, the international carrier with a minor stake in NorthPoint, might consider buying the company. Global Crossing chief executive Leo Hindery has denied that his company would acquire NorthPoint.

Analysts said the company "may announce new funding as early as Tuesday," Bloomberg News reported last week. The report included Gateway, the large PC maker, and software giant Microsoft, an existing NorthPoint investor, as potential sources of new funding. NorthPoint also was downgraded to an "under review" rating from "hold" last week by Jefferies & Co.

NorthPoint is expected to lose 85 cents per share, according to a consensus estimate of Wall Street analysts polled by First Call/Thomson Financial.

The company will hold an analyst conference call regarding earnings tomorrow at 1 p.m. PT featuring chief executive Liz Fetter and chief financial officer Mike Glinsky.

NorthPoint is one of several competitive local phone companies that are primarily offering high-speed Internet connections to businesses and consumers.

The company is part of a triumvirate of upstarts, including Covad Communications and Rhythms NetConnections, which went public in early 1999.

The trio have raced one another and the Baby Bells to install DSL in the nation's largest cities. The highly competitive broadband market has been dominated by the cable industry and services such as Excite@Home and Road Runner.

But the technology stock downturn, coupled with some minor hiccups, sent stock in all three tumbling. The depressed stock market valuations led many analysts and industry executives to question whether NorthPoint, Covad or Rhythms might be takeover candidates while their stock was cheap.

NorthPoint investors include Intel; Microsoft; @Work, the business unit of AT&T-controlled Excite@Home; and Frontier, the former communications company that was acquired by Global Crossing.

Bloomberg News contributed to this report.