HYBRID SHUTDOWN IMMINENT IN WAKE OF SPRINT DEPARTURE

Losing Sprint undermines fixed wireless vendor

During its 12 years of existence, Hybrid Networks survived as fixed wireless broadband morphed from a channel-limited alternative to cable television into a high-speed data communications technology. But it probably can't survive losing its biggest customer — Sprint — or lackluster international sales.

The vendor must repay $5.5 million to debenture holder London Pacific Group by April 30, but the company can project revenues of only about $1 million. As a result, Hybrid likely will shut down or declare bankruptcy.

Hybrid can survive if outside financing arrives to stop the bleeding or if another company buys it, but “neither of those in this weak market is very likely,” said Hybrid President and CEO Michael Greenbaum, who also became chief financial officer when Scott McDonald resigned last week.

One place from which money definitely will not flow is Sprint, which owns almost 20% of Hybrid and used Hybrid as its first-generation vendor. The Sprint/Hybrid relationship soured late last year when Sprint stopped deployments until it could get its hands on second-generation gear and ceased future orders from Hybrid.

“Sprint made it clear from the beginning that its investment was tied to nothing more than Hybrid as a vendor to Sprint,” Greenbaum said. “So long as it remained an important strategic consideration for Sprint, they would continue.”

When it became apparent that Hybrid's technology didn't fill Sprint's needs, the funding stopped. A Sprint spokeswoman wouldn't comment.

Although mired in its own financial woes, Sprint still plans second-generation technology trials in Houston, San Jose and Montreal. Sprint did not name vendors, but Hybrid did not make the cut.

“Those are technology trials,” Greenbaum said, adding that once a technology is selected, there will be an additional 18 to 30 months of hard work in in-field experience.

Hybrid's plight is frighteningly routine in a broadband wireless sector that has been hammered relentlessly by lousy market conditions and jittery customers, said Peter Jarich, an analyst for The Strategis Group, who was surprised that Hybrid capsized and started to sink so quickly.

“People realized that things weren't that good [at Hybrid], but it seems that it's a lot worse than anyone expected,” he said.

Hybrid last week laid off nine employees — 18% of its work force — as it struggled to remain liquid until April 30. Those cuts followed a 15-employee November layoff (see figure).

HYBRID'S HIGHS AND LOWS
President and CEO -- Michael Greenbaum Headquarters -- San Jose
Peak revenue Q4 2000: $12.9 million	Most recent Q4 2001: $7.6 million
Peak stock price Sept. 28, 2000: $19.25	Most recent Feb. 21, 2002: $.09
Peak employee base October 2001: 71	Most recent February 2002: 41

Like Greenbaum, Jarich was not optimistic that Hybrid can survive.

“Who would buy them?” Jarich asked. “Someone could pick up Hybrid fairly cheap. There are still some international opportunities out there. The question is just how long it's going to take to get those.”

It probably will be too long to help Hybrid's short-term money needs.

“If you cannot meet your obligations to the note holder, all your efforts must be devoted to recovering his investment on his loan,” Greenbaum said.