This article appeared at ISP Planet. Interesting info. It will be even more interesting when the SEC filings for Allied Riser start to include the Cogent revenue and expenses.

http://isp-planet.com/profiles/2002/cogentco.html

Robert Marsh
Head Surfer Rackshack.net

Interesting, so the CEO thinks the company is going to do well...okay, I'm convinced :D

It's interesting how Mr. Schaeffer down plays the Cisco connection. Cogent wouldn't of gotten off the ground without Cisco.

Allied Riser is a good buy for the real estate. Hopefully Cogent will be able to fix all the problems Allied had.

Thanks for the article. Interesting.

looks like Cogent went onto the AMEX on Tuesday, its selling for $3.17/share right now. Im wondering if its a good buy at $3.00? I will look into this further, but from what I am hearing, and what the article insured upon me, is that this company has a large debt, but a huge market. I think they wont do so well on the stockmarket for a few years, but it may become a good investment for long term investors.


Jim

Considering it started the day at $5.05 and lost $1.88 I would give it about a month to settle in before looking at it.

i was thinking the same, but wondering if anyone has any inside information if anything is coming up soon in the news with them.


Jim

Originally posted by jimb
i was thinking the same, but wondering if anyone has any inside information if anything is coming up soon in the news with them.


Sure, I'll post all of my insider trading tips here, that'll make it easier for the SEC to track me down :D.

well....um....;) if you have any information on...um....the internet...cough cough *insider info on cogent *cough cough...we can talk about it, just email me :) , i wont tell anyone:D



Jim

Headsurfer, I am not going to go and track down Cogent's financials as I am just an interested bystander and not directly involved with Cogent in the way that rackshack is a customer of theirs. But I wonder whether your business plan makes contingency for a what if, worst case scenario? What if, worst comes to worst, Cogent burns through its working capital after X number of months of sustained ongoing operating losses (assuming worst case, again I have not looked into the financials, but I am sure you have). What then for rackshack in terms of being able to sustain your business and pricing model if Cogent were to drop of the map sometime down the track? Are there alternative providers you can use that will allow you to maintain your pricing model?

Again, I am just a curious bystander, who might one-day consider a rackshack server, if my needs grow beyond my current capacity provided with my dedi at pwebtech. (which is doing quite nicely for me BTW, give or take a few gliches along the way).

:)

<<edited to add>>

See (again, I don't know enough to offer opinion on this) but, from what that article you link to tells us, I look at it like this. The Cogent dude, Dave Schaeffer's main arguement in that article is that as they need to add capacity to their fibre optic network, the marginal cost of bandwidth provision falls. Well that is all well and good, and in general, optimising marginal cost is all well and good, but it still does not provide the full equasion of whether:

i) in the long run, revenue exceeds cost

and

ii) in the medium term whether the business has the cash reserves and cash flow to run the business regardless of what the long term cost/revenue forumula might be.

:)

Originally posted by freakysid
i) in the long run, revenue exceeds cost

and

ii) in the medium term whether the business has the cash reserves and cash flow to run the business regardless of what the long term cost/revenue forumula might be.


And I might add:

iii) Is there sufficient demand to require and fill that capacity, thereby achieving the economy of scale which might lead to a sustainable revenue stream?

I can't comment on Rackshack's contingencies, except to note that last time I browsed, their site shows traffic on other circuits; it seems that for days at a time, they actually don't even use the Cogent circuit, presumably due to technical problems.

Kevin

"Our business plan even assumes that over time there were be additional price erosion."

Ok, Cogent CEO says above. So, will the price of an 100MBps go down to $500 :D next year ?


elijaH

Originally posted by sigma
I can't comment on Rackshack's contingencies, except to note that last time I browsed, their site shows traffic on other circuits; it seems that for days at a time, they actually don't even use the Cogent circuit, presumably due to technical problems.From what I understand about the utilization/notutilized with RS's Cogent line was: there were some hardware incompatibilities with the cogent system and RS's hardware.. I believe they have ironed them out at this time or are working on it.

If you look at their graphs, they've got a number of pipes in there and it is hardly noticed (not at all by me) when the cogent line goes down or is turned off.

Of note: Earlier this week, RS had a pretty severe DDOS attack and I watched my routing change almost hourly, but.. there were only a few periods of downtime lasting only up to maybe 10 minutes if that long..

When I have been routed via the cogent line in the past, it's been very quick. My personal opinion is that companies like Cogent are sort of like companies like RS.. they are price beaters and *IF* successful long term, they will change the way we all do business.

If/when broadband becomes the norm and most people are connected to the net by fast connections, if we are still paying high prices for bandwidth, it will stifle the average small dedicated host.. Those who can afford it would be able to provide rich (read that big bandwidth) content while those smaller hosts would be forced to trickle along..

Me hopes that Cogent is very successful and that bandwidth stays low low low..

Shortbanded

here could be one reason why Cogent is still in red for their profits:


David Schaeffer, 45
Chairman, CEO $219K

William Currer, 54
Pres, COO $228K



Also, considering they both have over $5,000,000 in stock options alone.


I mean, Cogent is only making $800,000 per year!!!


Jim

I personally wouldn't invest a penny in them. At the rate they are losing money, I don't see how it will start getting better. They will have to file for bankruptcy and then try to grow from there. Wonder how long Cisco will keep investing in them? They are the main people keeping Cogent on their feet.

Originally posted by jimb


I mean, Cogent is only making $800,000 per year!!!


Jim

Where did you get that number from?

Originally posted by Gernot


Where did you get that number from?



http://biz.yahoo.com/p/c/coi.html

The site is the Yahoo Profile on Cogent Co. It states in the Financial Summary that total revenues were $747,000 (9/2001).

Thats REVENUE!!! Im not talking profits, Cogent lost $45mil in 9 MONTHS! Its incrediable how they are still in business. If I were an investor, I would have pulled out a LONG time ago.


Jim

Originally posted by jimb




http://biz.yahoo.com/p/c/coi.html

The site is the Yahoo Profile on Cogent Co. It states in the Financial Summary that total revenues were $747,000 (9/2001).

Thats REVENUE!!! Im not talking profits, Cogent lost $45mil in 9 MONTHS! Its incrediable how they are still in business. If I were an investor, I would have pulled out a LONG time ago.


Jim

Then I am guessing you dont own any other internet or telco stocks either. Specially since alot of them havent had a profit in a few years. If you think 45mil is a loss, look at level3s per quarter loss.

Originally posted by Dilhole


Then I am guessing you dont own any other internet or telco stocks either.


I tend to be more of a conservative investor. I like businesses that make money, not loose it! :D



Jim

Originally posted by jimb



I tend to be more of a conservative investor. I like businesses that make money, not loose it! :D



Jim

Makes perfect sense =)

Originally posted by jimb
Cogent lost $45mil in 9 MONTHS! Its incrediable how they are still in business.According to the article, Cogent has "about $140 million in cash and $200 million in borrowing privileges", i.e. $340 million to burn. If they continue to burn money at the rate of $45 million per 9 months without any revenue, they have 340 / 45 * 9 = 68 months, or more than 5 years to burn all the money.

Actually, to be on par with the industry, their money burn rate should at least double ;)

Why dont we all just wait for a stock split before investing in it.

Originally posted by dabystru
According to the article, Cogent has "about $140 million in cash and $200 million in borrowing privileges", i.e. $340 million to burn. If they continue to burn money at the rate of $45 million per 9 months without any revenue, they have 340 / 45 * 9 = 68 months, or more than 5 years to burn all the money.

Actually, to be on par with the industry, their money burn rate should at least double ;)

Fair enough :)

Why does their Yahoo profile suggest that they have $10.5M in total cash? And a market cap just slightly above that? In fact, their S-1 says $10,528,000 cash, $607,000 working capital, and, well, read it for yourself:

http://www.sec.gov/Archives/edgar/data/1158324/000091205702003406/a2068762zs-1.htm#toc_cc1102_1

I have no opinion or position either way, I'm just checking facts.

Kevin

Originally posted by sigma
Why does their Yahoo profile suggest that they have $10.5M in total cash?Are you suggesting Cogent's CEO Dave Schaeffer may lie in the interview? For myself I found a simplier explanation.

I guess Yahoo's profile is using the latest publicly available data, i.e. S-1 form. Look at S-1: although it is filled on Jan 30, 2002, balance sheet is for 9 months period ended September 30, 2001.

After that, at least, Cogent sold $62 million of its preferred stock on October 15, 2001 and Cisco Capital agreed to enter into a $409 million credit facility with Cogent in October 2001, which gives us $471 million, far more than $340 million Dave suggests he potentially has available now.

I guess what happened after they entered into credit facility with Cisco Capital they converted some $XX million of credit facility into cash. That's why Dave is suggesting Cogent still has $140 million in cash and $200 million in borrowing privileges as of Feb 2002.

Originally posted by dabystru
Are you suggesting Cogent's CEO Dave Schaeffer may lie in the interview? For myself I found a simplier explanation.


No, I'm not suggesting anyone was lying. I was just observing various sets of facts. The S-1 goes on to talk about covenants which restrict their borrowing ability in various ways, but there isn't enough detail to see if that will be an issue anytime soon.

Kevin

Originally posted by jimb




http://biz.yahoo.com/p/c/coi.html

The site is the Yahoo Profile on Cogent Co. It states in the Financial Summary that total revenues were $747,000 (9/2001).

Thats REVENUE!!! Im not talking profits, Cogent lost $45mil in 9 MONTHS! Its incrediable how they are still in business. If I were an investor, I would have pulled out a LONG time ago.


Jim

Ah okay these numbers represent their first 3 quarters of 2001 where they had hardly any customers at all. They finished building out their network in April I believe which is when they started accepting customers.

I'm very interested to know their 4th quarter results though, but I couldn't find them yet on the web. I guess I'll have to wait till they file it :)
The 4th quarter should be much more relevant than the previous quarters.

I think it's fair to say that rationality speaks louder than accounting numbers and borrowed cash. How can Cogent make any money? The numbers needed to support their paid transit and OC-192 backbone are very very high.

They are banking on massive oversubscribing. But let's say the average office uses a .5 Mbps average. The average wholesale is pushing probably 30 - 50 Mbps on their connection. That leads to a huge disparity at the peering points. That's why Cogent's peering is really odd. I.E. we see packets leave Atlanta destined for other Atlanta hosts that hit the Mae West. Funny peering does not mean they are destined to go out of business, but it sheds light on how their network works, which in turn sheds light on their future of financial instability.

Bottom line: Any host adjusting their pricing models on the availiability of Cogent's remarkable pricing better have quarterly contracts and nothing longer. You may be stuck when your prices go up and your contract's are priced below your cost.

While I do not know the exact numbers, I suspect that Cogent pushes 20x what they pull from other providers.

Drew Nichols