Spike Broadband cuts staff, eyes sale after losing Danish contract

The failing broadband fixed-wireless industry has claimed another vendor. Spike Broadband Systems yesterday laid off most of its staff and announced it would try to sell or merge the company after a planned $335 million deal with Danish phone company Sonofon collapsed.

Sonofon is a joint venture of BellSouth International and Telenor. It had planned to roll out a nationwide fixed broadband wireless network for all 5 million residents in Denmark, but the deal took a hit when Sonofon was forced to cut back deployment by about 80% after BellSouth diverted international funds to the U.S. market.

“It’s tough. The company pretty much did everything right. We hit the big one, but it came right back, and we’re not a big enough company to survive the economic conditions out there,” said Cristian Parrino, Spike’s marketing vice president who is not among a core administrative staff of 20 that the company has retained from its 150-employee base.

The always-shaky economic environment for fixed wireless worsened in the last several months, as the U.S. economy reeled from the Sept. 11 terrorist attacks and major providers Sprint and AT&T Wireless delayed or cancelled rollout plans.

“Sept. 11 didn’t affect international carriers, but it affected U.S. capital anywhere in the world, and Sonofon had 50% U.S. capital from BellSouth,” said Parrino. “In the U.S., if you look at AT&T and Sprint, it very much affected the financial community.”

The Danish telco had ordered 20,000 consumer devices from Spike and was supposed to order 150,000 more next year. Based on that, Spike was talking with merger or acquisition partners from a position of strength.

But three weeks ago, Spike learned that Sonofon decided “to use the 20,000 that they currently bought to target businesses. They’re not completely moving out of it, but in terms of Spike, they're not buying anything,” said Parrino.

Spike now must seek a merger without any real customer base. Among the companies thought to be in pursuit is Siemens, which could use Spike’s international expertise to expand its fixed-wireless offerings when the market improves.

“It’s a shame. Internationally, you could see a slowdown in carrier spending, but we were working on over 30 proposals until yesterday for international carriers,” Parrino said. “There’s a market, but unfortunately, it’s not soon enough. It’s at least six to nine months out.”

Spike’s employees were told of the decision to cut staff and reorganize via a memo from CEO Jim Zucco that equated the company’s situation to the Yankees losing the World Series in the bottom of the ninth inning.

“Like the Yankees, Spike is a world-class organization that has proven time and time again that it can come from behind and win,” Zucco’s memo said. “But, unlike the Yankees, this defeat for us is not at the hands of a competitor, but at the hands of unfavorable forces in the telecom industry and global market conditions.”