Cogent Communications Losing Some Business, But Lots of Share Price
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In its second-quarter earnings report in August, District-based Cogent Communications, an Internet service provider for businesses, slashed its income and revenue forecasts for the year on projections that the growth of Web traffic was slowing.
The company, which will report its third-quarter results Thursday, has said it expects to report a loss of 50 to 60 cents a share instead of previous estimates of 20 to 30 cents per share.
Since that second-quarter report, fresh concerns have emerged about the economy's impact on the firm as corporate customers clamp down on spending. Such uncertainty has sent the firm's share price tumbling. It hit a 52-week low of $3.57 on Oct. 10, 87 percent off its high in the past year.
Chief executive David Schaeffer said that growth in Internet traffic continues to be weaker than last year. Cogent has lost some corporate business, but overall corporate customers -- financial service firms, law firms and consulting businesses -- aren't closing down their accounts, Schaeffer said. Those businesses may cut back on jobs and perks for executives, but they won't cut off their Internet connections, he said.
For example, when Bear Stearns and Lehman Brothers shuttered their operations, the firms that bought the banks and their assets maintained contracts with Cogent.
As for Cogent's roughly $300 million of debt due in 2027, Schaeffer said the firm has been buying up that debt directly at a discount, which should bolster results for the third quarter.
"We are the lowest-cost Internet service provider, so when time gets tough, people are more likely to use us," Schaeffer said.
