eWEEK content and product recommendations are editorially independent. We may make money when you click on links to our partners. Learn More.
Unable to meet its infrastructure and real estate financial obligations, Yipes Communications filed for Chapter 11 bankruptcy protection in the U.S. Bankruptcy Court for the Northern District of California.
The gigabit Ethernet provider has made arrangements for debtor-in-possession financing so that it can continue to serve its current customers, turn up service for new customers and conduct its normal business.
The filing was made March 21. As of 6:30 p.m. Eastern time on March 22, Yipes did not return phone calls for comment on the filing.
Even though Yipes is facilities-based and had $291 million in equity funding, it has not been able to get enough penetration in any given market to pay off its capital expenditures, says Nick Maynard, senior analyst at Yankee Group. “It is the classic problem,” he says. “They couldnt get it to point where they were cash-flow positive.”
According to Maynard, Yipes had unsuccessfully tried to secure another round of equity funding since late summer.
Another factor contributing to Yipes financial woes was the cost of taking fiber out to buildings. Yipes had tried to offset the cost by wholesaling capacity on its fiber rings, but that strategy clearly wasnt enough, says Jason Knowles, analyst at Current Analysis. “It is shocking news, but not entirely unforeseen,” he says.
Analysts say its too soon to tell whether Yipes can emerge from bankruptcy intact. Smaller companies such as Yipes have a harder time pulling out of Chapter 11, says Maynard. “They dont have the gravitational pull to get the finances to pull themselves back out.”
Yipes bankruptcy is a blow to the business model of so-called EtherLECs, but analysts remain bullish on gigabit Ethernet as a telecom service. “Gigabit Ethernet will go forward as a service, but not as a business model,” says Greg Mycio, director of broadband analysis at New Paradigm Resources Group. “But it will be left to integrated players, not specialty players.”
But all of Yipes hard work will not have been in vain. “Its always the first soldiers on the beach who go down,” says David Isenberg, an analyst and member of Yipes advisory board. “Look at what happened with the Apple Newton — everyone laughed at it,” he says. “Now we are all using Palms and Handsprings.”