High-speed wireless data access provider Metricom Inc. posted a fourth-quarter loss and said it will postpone the introduction of its Ricochet data network in some markets until it secures additional financing. The company noted it had just over $525 million in cash and investments at the end of the fourth quarter, barely enough to fund the company through the middle of the year.
Metricom reported it had 34,000 total subscribers to its service at the end of the fourth quarter, short of analysts’ expectations of 40,000 subscribers. Net subscriber additions to its 128 kilobits per second service totaled 9,700 customers for the quarter, well below expectations of 15,000 customer additions.
The company reported a net loss for the fourth quarter of $114.4 million, or $3.71 per share, compared with a net loss of $56.3 million, or $2.51 per share, for the fourth quarter of 1999. Analysts surveyed by First Call/Thomson Financial expected a loss of $3.55 per share.
Revenue also declined from $4.9 million in 1999 to $2.4 million last year, with capital expenditures rising from $27.4 million to $201.6 million during the same timeframe. Average revenue per user rose slightly from $25.61 during the third quarter of 2000 to $26.61 during the fourth quarter.
After releasing its fourth-quarter results, Metricom said it planned to scale back its service deployments for this year and instead focus on key markets in order to manage its cash. It also said it is considering job cuts.
“The reality of the tight capital markets requires that we scale back our deployment plans and look internally for further operating efficiencies,” said Timothy Dreisbach, chairman and chief executive officer of Metricom. “This prudent approach reduces the amount of capital required and provides additional time to secure more extensive financing on favorable terms.”
In the past, analysts and investors rallied behind Metricom’s Ricochet service, which provides 128 kilobit per second wireless connectivity access for laptop computers, due to the perceived large market of mobile professionals in need of high-speed wireless data services. WorldCom Inc. recently announced plans to increase the number of markets in which it would offer the Ricochet services from three markets to seven markets, with plans to expand to 10 markets by the end the first quarter and 30 markets by the end of the year.
Metricom offers high-speed service in 13 markets, including Atlanta, Baltimore, Dallas, Denver, Detroit, Houston, Los Angeles, Minneapolis, New York, Philadelphia, Phoenix, San Diego and San Francisco, with its original 28.8 kbps service offered in Seattle and Washington, D.C. The company blamed some of its recent revenue decline on its decision to discontinue sales of modems and subscriptions for its 28.8 kbps service.
In addition to WorldCom, Metricom reseller partners include Juno Online, GoAmerica, Aether Systems, Wireless WebConnect! and IP Communications.
Peter Friedland, wireless analyst with W.R. Hambrecht & Co., recently noted that while he saw a bright future for Metricom, there were plenty of issues that had to be addressed.
“The company must motivate its resellers to aggressively promote Ricochet services; the company must continue to sign up additional resellers; and the company needs roughly $500 million of additional financing by mid-2001 to complete the buildout of its network,” Friedland said in a recent report.
Friedland said it is highly unlikely Metricom would be able to tap the public equity and debt markets for additional funding, leaving strategic private investors as the most likely potential source of capital. Friedland also slashed his 2001 subscriber addition estimate for Metricom from 412,000 customers to 78,000 customers and cut his rating on the company from buy to neutral.
Other analysts quickly followed suit in downgrading Metricom’s stock, with Merrill Lynch cutting its rating from neutral to reduce and Salomon Smith Barney downgrading the stock from buy to neutral. Moody’s Investor Services downgraded Metricom’s 13-percent senior notes due 2010 to Caa1 from B3 and the company’s senior implied rating to Caa1 with potential for further downgrades.
Metricom’s stock tumbled on the news, losing more than 40 percent of its value last Thursday to close at $5.75 per share, just off its 52-week low of $5.50 per share set earlier in the day. The stock fell an additional 20 percent in early Friday trading to a new low of $4.69 per share. Metricom’s stock was trading as high as $100.25 per share last February.
