Making a turnaround?

ICG Communications is in bankruptcy and won't report first quarter earnings until June, but the company claims it made money in March, which may have helped it attract IDT as a new, one-third equity investor (see related story on page 12).

“We were profitable in March,” said Randall Curran, who became ICG's CEO just before it filed for bankruptcy last Nov. 14. “Our expectation is that we are profitable and will stay profitable.”

Curran said ICG is in “Phase 3” of its Chapter 11 bankruptcy, which features the plan of reorganization and “exit financing” — that is, either bank financing or equity financing. Phase 1 was stabilizing the company, while Phase 2 included forming a business plan and becoming profitable.

“We hope that this will be over by the end of the year or early next year,” Curran said.

But it may end with all of ICG being sold, said Jeff Moore, a telecom analyst at Current Analysis.

“IDT has acquired 33.3% of ICG, and IDT seems to be on some sort of mission, considering that they've also taken a large stake in Teligent,” he said. IDT has “deep pockets — they got $1.12 billion out of the sale of part of Net2Phone. They could integrate their Teligent holdings with their ICG holdings. I'm not saying that would be a good thing to do, but it's a possibility.”

Meanwhile, Curran said ICG's business plan highlights its “infrastructure strengths” and the leveraging of its customer base.

“We're focusing on three areas: dial-up business to ISPs and other carriers; special access, or point-to-point, providing private bandwidth in metro areas for IXCs or corporations; and corporate service business in the metro areas data on T-1s and T-3s,” he said. “We'll sell voice, but de-emphasizing voice for data.”

This may not be original, but Curran insisted ICG would differentiate itself on quality and price.

He also noted the focus of ICG's old plan was growth, while the new plan is designed to make money.

Curran has been through bankruptcy before. He came to ICG after spending 13 years with Thermadyne Holdings in St. Louis, which he took through bankruptcy as its CEO, and cited many reasons for taking the job.

‘I'd been through bankruptcy before, was familiar with the process, and knew, while it may not be a pleasant thing, it need not be a bad thing.’
— Randall Curran, ICG

“One, this was an opportunity to get involved in a new industry, one with better market-growth opportunities than the ones I'd participated in in the past,” Curran said. “And two, I'd been through bankruptcy before, was familiar with the process, and knew, while it may not be a pleasant thing, it need not be a bad thing. And three, there had been $3 billion invested in this company, and I just knew there had to be a good company here. It was just a matter of mining it out.”

But there have been days when Curran, to paraphrase W. C. Fields, would rather be in St. Louis.

“There were network and customer relations issues more problematic than I'd expected,” he said. “The employee morale was bad, and the management team wasn't working together very smoothly.”

Several hundred employees are gone and only Mike Kallet, executive vice president and chief technology officer, remains from the old management team.

Customers reportedly are assuaged, which Curran credits to the surviving employees, Kallet and Cisco Systems — a major vendor to ICG that was stuck holding a $32 million bag when ICG went bankrupt. However, it assigned about 60 employees to help fix network and system problems at ICG facilities.

Kevin Kennedy, Cisco's senior vice president of IOS technologies and Cisco's telecom point man, said Cisco's support reflects its faith in Kallet's network knowledge and Curran's bankruptcy knowledge. Cisco may not be as helpful with all bankrupt customers, he said.

“In every case, the facts are very different,” Kennedy said. “This was a case where our customers were the same as theirs. We had a supreme confidence in Mike and Randy — that the partnership would evolve and they would be successful. “

“This was a customer with a sound infrastructure and key points in turnaround identified,” he added. “Mike, I knew for years; Randy came in as a proven executive. From Cisco's perspective, we start at the point of how we fortify our partnerships.”