XO Launches 40G Services, Awaits Icahn’s Next Move

March 29th, 2010 by · 8 Comments

Competitive service provider XO Holdings (news, filings) has launched 40G services nationwide.  They are now offering both 40G transport links and 40G IP transit links, seeking to better address rising demands for ultra high-bandwidth and low latency network connectivity in the wholesale and large enterprise space.  XO's intercity backbone consists mainly of fiber IRUs from Level 3, and is lit with Infinera gear.  Since Infinera's native 40G wavelength products aren't out yet, XO is most likely powering its 40G service with Infinera's 4x10G TAM modules.  When the market for 100G services finally materializes, they will probably address it in a similar manner.

This operational advancement comes against the backdrop of an impending balance sheet move at XO about which they have been very, very quiet.  The remainder of the company's class A preferred stock is due on April 15, or two weeks from Thursday, and something's going to have to give.  Icahn has said he doesn't want to extend the deadline, the company says it doesn't want to issue debt due to covenants, and the stock price remains too low to do much with.  Any deal between the board and Icahn will come under intense scrutiny, just as his proposed buyout of minority shareholders did last summer before being withdrawn.

Adding to the fog, the company hasn't yet filed its 10-K for 2009.  Apparently the stock price was low enough last summer that the low float allowed the company to qualify for a March 31 deadline this year, and they're going to use every minute of it.   But cliffhangers and minimal communication from management are a way of life for XO shareholders, it just never seems to end.  Theoretically they could redeem the class A preferred stock in cash, but that would leave them with unsustainably low cash levels and a business that still burns cash.

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Categories: CLEC · Internet Backbones

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