iBEAM Files for Bankruptcy; Williams Purchases iBEAM Assets for $25 Million
Ailing iBEAM files for Chapter 11 bankruptcy and gets loan from Williams Communication.
On Thursday, iBEAM (www.ibeam.com) announced that it has voluntarily filed for Chapter 11 bankruptcy protection in a Delaware court. Williams Communications, already a 49 percent owner of iBEAM, signed a deal yesterday to purchase the assets of iBEAM for $25 million in cash.
Williams also said it was giving iBEAM a loan of up to $18 million to continue operations until the asset sale is finalized. At the time of the sale, the loan will be repaid from the proceeds of the asset sale. In June 2001, Williams invested $20 million in cash and $10 million in services in iBEAM, which had been struggling to stay afloat.
According to the companies, Williams’ purchase bid and its loan are both subject to approval of the bankruptcy court. Other companies may bid on iBEAM, but so far no other offers have been received.
Drew Henry, senior VP of marketing for iBEAM, said the company recently took operations off Exodus' backbone and switched completely to Williams in 12 hours, without having an impact on its customers. "We have communicated with all our customers in the last 24 hours and in all circumstances, our customers were very positive," said Henry. "Since we've tightened our network into the Williams network . . . the reaction has been very positive."
"Our agreement, if approved by the court, will benefit customers of both iBEAM and Williams Communications. iBEAM’s impressive list of blue-chip streaming customers and expertise is a perfect strategic fit for the assets that we already have in place, including our network and broadband media platform," said Howard Janzen, chairman and chief executive officer of Williams Communications. "We are confident that our proposal offers the best options for iBEAM's customers, employees, and creditors, and that it is a realistic plan which provides significant long-term value to Williams Communications shareholders through added capabilities and increased network utilization."
In response to the news, the Nasdaq exchange said it would stop trading on iBEAM until it supplied additional information, although it didn't specify what information it was looking for. Currently, iBEAM's stock price is at 29 cents.
Greg Onyszchuk, vice-president MediaExtranet for Williams Communications said that the deal would accelerate synergies between the two companies. They called the decision to file bankruptcy as a mutual one. iBEAM was looking to secure funding, and Williams was the right decision, said Henry. "It was important to reduce the risk of some particular legal proceedings that iBEAM is party to," he added. The lawsuits in question are shareholder lawsuits, which many post-bubble Internet companies are facing in recent months, regarding alleged irregularities with their initial public offerings.
Asked about a rumored lawsuit between RealNetworks and iBEAM, Henry said that no public proceedings have been announced with any vendors. "I don't think I can comment on anything between iBEAM and Real," he said.
According to Henry, the financing from Williams will be used to ensure that customers are handled well during the transition period. "We would like to be on the best and most stable footing and on the best possible road track," he said.
Williams said it plans to integrate iBEAM into its Vyvx Broadband Media unit, which provides broadband media services, but there was no word on whether iBEAM executives would move over. "It's premature to comment on that," said Onyszchuk.
Because the deal isn't final yet, there was no word on whether there would be company-wide layoffs. Henry did say, however, that iBEAM has been "managing the size" of the company for the past year, which results in some layoffs. But he said that he envisions a "significant number" of iBEAM's employees would stay on until after the sale to Williams.
The companies expect the transaction to be completed within 60 to 90 days. "It's a fairly aggressive timetable," said Onyszchuk. "The courts will determine how quickly we can move through the transaction. We'd like it to move as quickly as we can, so that potential impact is minimized and the notion of risk is quickly laid to rest."
In recent months, iBEAM said it has stayed away from delivery content via satellite, like it did in its heyday. "We're finding right now, we will rely on the network infrastructure that [Williams has], and not really focus on the delivery mechanisms we've used in the past," said Henry. "We have found that as the integration into Williams’ network [progresses], the delivery backbone itself is of remarkable quality." Henry called the overall delivery performance as "truly outstanding," saying that the company can now focus on the "application service" on top of the delivery.
According to a company representative, streaming traffic at one of iBEAM's news sites increased from "2000-10,000 percentage points" in response to the increased demand in news after the terrorist attacks of a month ago.