Global Crossing Stumbles as Losses Widen
By Cindy Christ

Shares of Global Crossing Ltd. plunged as much as 16 percent Friday after the company reported steep losses amid ambitious plans to build and operate the world's most advanced Internet- based fiber optic network.

Hamilton, Bermuda-based Global Crossing (GBLX) said that fourth-quarter losses more than tripled due to expansion of its undersea cable network and effects of recent acquisitions.

Last year, Global Crossing acquired U.S. long distance carrier Frontier Corp., cable installer Global Marine Systems and U.K.-based telecommunications operator Racal Telecom.

For fourth quarter 1999, Global Crossing posted revenues of $1.1 billion, up from $203 million last year. Including acquisitions, pro forma losses widened to $184 million, or 24 cents a share.

Consensus estimates by First Call/Thomson Financial estimated losses of 22 cents a share.

For full-year 1999, the company posted sales of $1.7 billion.

Shares of Global Crossing recovered some of their losses to close down $8.69, or 14.2 percent, at $52.38.

On Thursday, Global Crossing announced an agreement with Level 3 Communications to build a super-high capacity fiber optic cable across the Atlantic Ocean.

The companies said construction has already begun on the new four fiber pair, 1.28 terabit cable, which should be up and running by September 2000.

Under terms of the deal, Global Crossing and Level 3 will each separately own and operate two of the four fiber pairs on the new transoceanic cable.

"This co-build agreement with Level 3 marks a new strategy for transoceanic cable deployment. Co-building along this route will allow Global Crossing to secure the capacity required for the ever-increasing trans-Atlantic demand while we evaluate next generation technology for use in future systems," said Bill Carter, president of Global Crossing Development Company, in a statement.

While shareholders were busy dumping Global Crossing, some analysts were advising investors to pick up shares on Friday's weakness.

With major legs of the Global Crossing Network up and running from Europe to Japan and major expansion efforts well underway in fast-growing markets in Hong Kong, China, Taiwan and Singapore, Global Crossing is likely to become the first carrier to complete a worldwide, broadband network to meet exploding demand for Internet and data services.

Over the past five years, global data traffic has grown 86 percent a year, more than six times the growth of international voice traffic, which it now surpasses in volume, driven by relentless expansion in electronic commerce and the Internet.

Global Crossing also operates a 1.3 million square foot Web- hosting business called GlobalCenter, which supports 300 of the top Internet brands, including Yahoo!, The Motley Fool, Ziff Davis and eToys.

Market analysts project that the Web hosting and data center market will be worth $12 billion by 2001 to 2002, with about 300 to 400 new centers springing up in North America within the next two years.

Data centers storehouse massive amounts of communications equipment like servers, routers and storage gear used to host Web sites, run Internet commerce applications and manage Web traffic.

GlobalCenter recently hired ex-AT&T and TCI Cable honcho Leo Hindery as chairman and CEO.

But what really has analysts excited is a planned spin-off of GlobalCenter, now slated for mid-2000. What isn't clear, however, is whether current shareholders will participate in GlobalCenter's sure-to-be-hot IPO.

"Senior management hasn't made a decision as to whether they will benefit or not," a company spokesperson told SplitTrader.com.

On Wednesday, Merrill Lynch analysts Adam Quiton and Megan Kulick restarted coverage of Global Crossing Ltd. with "intermediate-term accumulate" and "long-term buy" ratings, setting a price target of $70 a share.

Quiton and Kulick also said they might raise their price objective once the company shows it's successfully integrating the Frontier Corp. acquisition and after GlobalCenter's initial public offering.

Despite concerns over widening losses, one thing's for sure. If the company announces that current shareholders will receive shares in the GlobalCenter IPO, look for Global Crossing to recover today's losses and more in a heart beat.