Global Crossing, the provider of bandwidth and IP-based services to corporations around the world, today reported fourth-quarter and full-year 2009 results that included a 6 percent boost in revenue and lowered losses for the year. Still the company has a hard slog ahead of it as the world recovers from an economic crisis that stifled business spending. The nature of business communications and the value of services to an enterprise are in flux.
I chatted for a few minutes today with John Legere, the CEO of Global Crossing, and Gary Breauninger, its chief financial officer for North America and Worldwide Carrier Services. I sought to understand how Global Crossing was planning to grow, and how the overall market for bandwidth will. The bad news is that prices are declining, the less bad news is that they’re not declining as rapidly as they were in the years after the telecom bust, when capacity was cheap and plentiful.
GigaOM: The services you provide are dropping in price across all of your business lines. The company is barely profitable if we take out your debt, but with prices dropping, how will that affect your margins and growth prospects?
Legere: Prices are declining at a declining rate, which is good. And compared to the incumbents, market price declines are less of an issue for us because our revenue growth is replacing old technology for our customers. So when customers come to us they are converging on IP services with us at a significantly higher margin, and we’re taking market share from the major players.
GigaOM: There is a seeming surge in demand for IP services and connectivity, how is Global Crossing taking advantage of this, and profiting from this demand?
Legere: The stats show that customers start adopting IP as a platform for some of what they do, then move into a second phase where they converge applications on IP, and then move to a third phase where adoption grows wildly. We are late in the early cycle somewhere between adoption and convergence, and this move to IP has years and years left associated with it. Customers are moving from legacy technologies to IP voice and collaboration. We are offering services to them with cost savings of around 50 percent to them and high margins of between 60 and 80 percent for us. The contracts are long-term and the services are sticky to the customer.
GigaOM: So what are the macro opportunities around these IP services? Cloud computing?
Breauninger: With the Impstat acquisition in Latin America we have some data center operations and have since expanded into London and Amsterdam. Up to this point we have a set of on-demand data center products and a clear opportunity would be to venture into the cloud computing arena. That’s clearly an area of growth in the next 18-24 months.
GigaOM: Will you make acquisitions as part of that expansion? Other providers like AT&T already have existing cloud products today, how will you compete in a year or two?
Breauninger: We have grown the business organically from the data center business we have. And there’s no set definition for what constitutes cloud computing, and it’s an evolving space so we can still grow with products around our network and data centers as accessed through the cloud.
Related GigaOM Pro Content (sub req’d):