Earlier in the year, we alerted you to potential disruptions associated with California's electricity shortfalls (see http://cc.uoregon.edu/cnews/winter2001/power_short.html) because of the impact that could have on your network connections. Likewise, we believe you should also be aware of the potentially disruptive effect of volatile financial markets on Internet network providers.

Specifically, while consumer-oriented and business-to-business Internet "dot bombs" have become commonplace, for the first time major Internet infrastructural companies--companies with tangible physical assets such as fiber optic networks and network hardware devices--are also experiencing widespread financial problems.

For example, a number of major network providers have had their common stock delisted from the NASDAQ and/or have filed for bankruptcy, or are otherwise showing signs of financial difficulty. Additional firms appear poised to join them unless market conditions improve.

Current casualties include:

• Winstar Communications. On April 18th, 2001, Winstar Communications filed for Chapter 11 protection, and on April 26th, that company was delisted by NASDAQ.
  
• PSINet. On April 23rd, 2001, PSINet, a major Internet backbone carrier, was delisted from the NASDAQ. On June 1st, it filed for Chapter 11 bankruptcy protection.
  
• CAIS Internet. On May 24th, 2001, CAIS Internet (now Ardent Communications) was delisted by NASDAQ
  
• 360networks. On June 28th, 2001, 360networks filed for Chapter 11 protection. It was delisted from the NASDAQ on July 27th.
  
• Covad Communications Group. On July 20th, 2001, Covad Communications Group, a leading national DSL provider, was delisted from the NASDAQ National Market. On August 15th, the company filed a Chapter 11 bankruptcy petition
  
• Electric Lightwave. On August 7th, 2001, Electric Lightwave announced it was moving its common stock from the NASDAQ National Market System to the NASDAQ SmallCap Market because it no longer meets the criteria for inclusion on the NASDAQ National Market System.
  
• Rhythms NetConnections, Inc. On August 13th, 2001, the Wall Street Journal announced that Rhythms NetConnections, Inc., a national DSL provider, would be ceasing operations.
  

Networking companies whose stocks were trading below a dollar a share on September 5th, when this article was prepared, include:

While it is true that in many cases troubled Internet companies with tangible physical assets may recover, or may be successfully reorganized or acquired, under some circumstances network users of those services may experience disruptions and may need to be flexible during transition periods (while the companies merge or refocus their operations, or work to control costs and improve their profitability).

Disclaimer: the above market note should not be considered investment advice. If you are considering buying or selling any financial instrument, we urge you to seek qualified investment advice before proceeding.

Late-Breaking News: Nasdaq takes action to help companies remain listed: http://www.nasdaqnews.com/news/pr2001/ne_section01_278.html

References

• http://www.360networks.com/News---Releases---Details.asp?ID=139
  ("360networks Announces Delisting From the NASDAQ Stock Market...")
  
• http://ardentcomm.com/news/news_01-05-24.htm ("CAIS Internet Receives Notice of Noncompliance from NASDAQ")
  
• http://www.covad.com/companyinfo/pressreleases/pr_2001/082701_press.shtml ("Covad Communications Group, Inc. Files Plan of Reorganization and Disclosure Statement")
  
• http://biz.yahoo.com/bw/010720/0015.html ("Covad Common Stock to Move to Over-the-Counter Bulletin Board")
  
• http://www.eli.net/media/releases/2Q2001.shtml ("Electric Lightwave, Inc., Reports 2001 Second-Quarter Financial Results")
  
• http://www.psi.net/news/pr/01/apr23.html ("PSINet Announces NASDAQ Delisting")
  
• http://www.psi.net/news/pr/01/june1.html ("PSINet Files For Chapter 11 in the U.S. ...")
  
• http://www.wsj.com/public/sn/y/SB997458626320217691.html ("RhythmsNet Connections to Close, Leaving DSL Clients in the Lurch" ...available only to subscribers)
  
• http://www.winstar.com/press/2001/Templ.asp?fileid=0418011 ("WinstarFiles Voluntary Chapter 11 Petition")
  
• http://www.winstar.com/press/2001/Templ.asp?fileid=0425011 ("Winstar Announces NASDAQ Delisting")