MFN lowers sales forecasts

Citing a softness in its Internet infrastructure business, primarily from dot-com customers, Metromedia Fiber Network lowered its revenue guidance for 2001 to between $400 million and $420 million from about $478 million. The company also faces a funding gap if it doesn’t come to terms with lenders in the next 10 days.

For the current quarter, the company lowered its revenue guidance to between $89 million to $91 million, from $99 million. For the second half of the year, MFN lopped about $40 million off of quarterly revenue forecasts.

Despite the lowered sales forecasts, the company left normalized EBITDA (earnings before interest, taxes, depreciation and amortization) guidance unchanged, saying it was implementing ongoing expense reductions and cost controls. MFN expects to post an EBITDA loss of $45 million to $48 million in the second quarter, gradually declining to an EBITDA loss of $19 million to $22 million in the fourth quarter.

“We continue to see strong demand from our customer base in the metropolitan markets for both optical and Internet infrastructure services,” said a statement by Nick Tanzi, MFN’s president and chief operating officer.

One hurdle MFN faces is the continued penetration of enterprise customers to offset the weakness in its hosting and managed services units, according to Matthew Janiga, analyst at Goldman Sachs. Although MFN’s hosting, access and managed services units comprise 70% of the company’s sales, “fiber will continue to be the growth driver on the top and bottom lines,” Janiga said.

The other hurdle for MFN is a $350 million credit facility that the company is trying to negotiate with lenders. MFN needs the credit line to support operations for the remainder of the year. The deadline to reach an agreement is June 30.

“We believe there is a low probability of the loan being revoked by the underwriter, though the likelihood a substantial restructuring to the loan value and terms may not bode well for [MFN],” Janiga said.

Separately, MFN announced that search engine company Google had selected to co-locate its Internet server in MFN facilities in San Jose and Mclean, Va.

MFN shares dropped almost 40% yesterday and are currently trading below $2 per share.