Facing Shutdown, ZipLink Seeks Buyer

Independent ISP owners watch as Internet access wholesaler struggles to survive. A buyer could save the day, but ISPs are shopping for back-up suppliers all the same.

by David Aponovich of boston.internet.com [November 10, 2000]

Financially troubled ZipLink, a Lowell, Mass., wholesale provider of Internet connectivity to Internet-service providers, said it may have to cease operations on or before Nov. 17.

The company announced last week it could not pay a $1.9 million bill to WorldCom and needed a loan to make a partial WorldCom payment and to meet payroll.

Credit for a week
Today it said its Co-chairman Henry Zachs, a majority shareholder, has agreed to guarantee a loan against its $10 million credit line to keep the company running for another week while it tries to find a buyer or more financing.

ZipLink, which said it's in discussions with several unnamed potential acquirers, added there's no guarantee it will reach a deal to be sold. The company also said it could be forced to cease operations before next Friday "if unanticipated events or circumstances should arise."

The company today warned investors that it couldn't guarantee what return they could expect if and when the company is sold.

Hard times
Shares which traded as high as $23.875 in the past year, have fallen recently into the realm of penny stocks. On Friday, however, shares were up 30 percent trading at 0.812, up 0.188. They fell by half after last Friday's news the company was having trouble paying its bills.

ZipLink resells wholesale Internet access to more than 500 ISPs and to Microsoft's WebTV Networks, which accounts for a quarter of its revenues. About 1.5 million Internet users have online connectivity that comes from ZipLink. Many users get free or low-cost access through merchants including Costco and Barnes and Noble, which pay ZipLink based on hourly usage.

The financial crisis came to light last week, when ZipLink said it couldn't make the $1.9 million payment to WorldCom. The firm has received a payment extension through the end of November with minimum weekly payments of $196,000 required.

ZipLink has been steadily losing money, including a loss of $6.7 million on revenues of $8.3 million during the third quarter. It lost $18.7 million on revenues of $20.6 million through the first nine months of 2000 and as of June 30 it had an accumulated deficit of $45.3 million. The company hired a new CEO, William deKay, in October.

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