The former stock market darling blew through $4 billion in capital financing in record time building up a super CLEC that couldn't hold a profit in a paper bag. Their new chief has turned things around, but is it too soon for kudos?

by Jim Wagner of internetnews.com [October 10, 2001]

David Miln Smith, fitness guru and adventurer, knows a thing or two about taking chances. A self-described risk-taker and a person I would call just plain Mad Hatter-crazy, spoke to a crowd of Internet service providers ISPs at Fall ISPCON 2001 in Las Vegas this week.

Smith, who just for fun, mind you, ran through the Khyber Pass between Afghanistan and Pakistan during the height of the 1973 Russian - Afghanistan war, said that taking on lions and other predators is a lot like the tribulations independent ISPs face when competing with the likes of AOL Time Warner, AT&T and Verizon Communications.

And through it all, Smith said, keeping your nose to the grindstone is what separates the winners from the losers. "It's all about overcoming obstacles by taking action," he said. "If you get it right, good, if you don't, go back and work on it some more. A lot of times it's just about hanging in there and pushing through the bad times."

Funny thing is, Smith could be talking about the current environment surrounding the ISP biz or a certain competitive exchange carrier whose executive leadership is currently enduring a few tribulations of his own. It would be an understatement to say that ICG Communications has seen better days.

Ascending to ashes
When the darling of the market first launched its initial public offering (IPO) back in the heady days of the of the Internet—nearly two years ago—board members didn't worry about pesky issues like keeping costs in line. It was time to build up, build out, and conquer customers.

An aggressive national deployment schedule made ICG one of the largest point-of-presence (POP) providers in the U.S. At one time, 10 percent all domestic Internet traffic went through ICG, according to one industry insider.

But for every silver cloud, there's a dark lining. When the dot-come market imploded, ICG officials were left holding the bag for a corporation that couldn't sustain itself. Investors demanded that ICG make operations profitable immediately or exit the market.

ICG's network was in a shambles. Customers were furious over downtime, lousy customer support and a seeming indifference to their service concerns. Like rats fleeing a sinking ship, ICG's chairman and president Carl Vogel, along with two other board members, resigned without reason just hours after announcing an extensive business overhaul.

Steering from steerage
Randall Curran was brought in from Thermadyne Holdings Corp. to set the ship back on course, coming aboard as ICG's chief executive officer. Almost immediately, Curran announced the CLEC's decision to reorganize under Chapter 11 bankruptcy protection. Since then, ICG endured, stumbling forward while finding the solitude of corporate self-reflection refreshing during its time out from the spotlight.

It's obviously done them some good.

Since filing Chapter 11, ICG has been securing necessary bridge loans and cutting the chaff from its operations in pursuit of profitably. The only good thing about bankruptcy proceedings, as any company currently going through the process would tell you, is that it gets creditors off your back and out of the company coffers.

Curran said that the "hands-off" time was critical for ICG for if he were to turn the business around. Free from worrying about its $400 million debt load, which had grown at a rate of $32 million a month, new executive leadership finally took effective cost-cutting measures to take ICG Communications back into the black.

So far ICG has been successful, in a way. According to Curran, the company has been running profitably since February and now posts monthly profits of more than $6 million year-to-date.

What's brought about this radical turn of events for ICG? Are we talking about the same company that squandered away $4 billion in financing in just 24-months?

"At the height of its popularity, ICG had its fingers in operations everywhere," Curran said. "But behind the scenes, it was a company built to be sold. What happened is a direct result of that, with people spending money like that. What happened after that can only be described as an avalanche.

"My first day on the job, I got in at 8:30 in the morning to find out that the banks had frozen all of our assets," he added with a wry chuckle. "My first order of business was giving the banks $90 million to open our accounts back up again."

New directions
From the beginning, Curran had an eye toward making the company profitable again and rebuilding the CLEC's damaged reputation. The first step, he said, was assessing the company to find out what "jewel" was hiding in all the many operations it was running.

It came down to operating ICG around a business plan with three different units that would provide:

1. point-to-point connectivity for business customers;
2. local telephone and dial up Internet access services for residential accounts, and
3. POP servers to regional and national ISPs

The "new" ICG also got out of the DSL business, too. The costs of provisioning services, Curran said, was a losing proposition. Next came the necessary groveling required to keep ICG customers in the fold. Curran said the sales force—which until that point was geared toward acquiring new accounts—was revamped to maintain customers, not find new ones.

Curran said he personally made many phone calls to disgruntled ISPs and business clients, pleading for another chance. "Those were some of the hardest phone calls I've ever had to make," he said.

The unenviable task of staffing reductions came next. The trick, Curran said, was to fire people and at the same time bolster confidence in the company among those employees that remained. "Any moron can cut staff, but the art is in cutting staff and still improving the employee morale," he said.

What's Curran's ultimate goal?

Earning ICG a good name among business-class access providers for perhaps the first time since the company went public.

"There was one point when we were considering changing the name from ICG to something else, but I've been obstinate about not changing the name," Curran said. "I want to keep it, and I want it to stay. I want it where if one of my employees is walking down the road, and someone asks them where they work, they say 'Oh, I know ICG, that's a great company.' I can't wait to hear that."

Road to recovery
It's definitely a road less traveled—the tougher path to take. For some companies, changing their names is as common as we'd change our drawers. The decision to keep its name in tact is a bold move—one that acknowledges errors of the past while promising a better future for its customers and investors alike. It says, "We're hanging in there."

But as any soldier in the military would tell you, there's a fine line between bravery and lunacy. The fate of ICG s largely dependent on other companies putting their trust in a firm that's synonymous with foolish dot-com exuberance.

Since its fall, the way the ICG Communications has run its business is a cautionary tale for any new or existing provider to remember.

Curran acknowledges the challenges and said it's just a matter of time, "hopefully by some time next year, before things turn around." The intrepid adventurer David Miln Smith would likely respect Curran's thinking.

— End