Global Crossing Ltd.Essay Preview: Global Crossing Ltd.Report this essayGlobal Crossing Ltd. was founded by Gary Winnick and three business associates in 1997. (Wikipedia, 2007) The company than when public in August of 1998, and seven months after going public Globals shares jumped threefold. Global Crossings rose to greatness quickly, and just as quickly fell. What was the cause of its fall? Was it bad planning, or poor management? How did it emerge after filling for Chapter 11 bankruptcy? What social, legal, and ethical problems did it face, and what were the three factors that influenced this companies planning.
Gary Winnick was the chairman of the company from 1997 to 2002. Some say that he was the reason for its fall others say that Winnick cant blamed, as it was his fortune that fell so quickly. Winnick sold somewhere around $420 million of Global Crossings stock. Winnicks office was said to furnished with $1 million dollar furnishing and was called the oval office. Winnick also reportedly gave over $148 million to charities during the time that he was the chairman of Global Crossings (Wikipedia, 2007)
While Winnicks spending might have been a reason for Global Crossings quick fall, one must look at the spending of the entire company. Four of Globals CEOs were giving personal loans totaling of about $23 million. These loans were also forgiven while bankruptcy was on Globals horizon. This same four CEOs were give bonuses of about $13.5 million. The office space of Global Crossing was very pricey and the renovations do on the rented space were extravagant. Global also operated five corporate jets and spent of $150 million on accounting software. (Wikipedia, 2007)
Poor planning was definitely a factor in this companys quick fall. One area that the company showed poor planning in was it seemed to go through CEOs rather quickly. John Scanlon became the first CEO in 1998 and was only the CEO until February of 1999. Then came Robert Annuziate. Robert Annuziate was the CEO through two of the companys major acquisitions: Frontier Corp., which cost the company $11.2 billion and Global Marine which the company acquired for $850 million (Wikipedia, 2007). It was also during Annuziates reign that Global lost out on the acquisition of US West to Qwest communications (Labarba, 1999) Some believe that losing this acquisition was a major reason for the companys fast fall. During Annuziates reign the company also went from a medium sized company with about 150 employees to a large company of over 14,000 employees (Wikipedia, 2007).
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Global Marine
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When the company was taken over in 2001, it merged with Waco Inc. We have talked a long time about this (Wikipedia, 2008). We will talk now about this merger and how it was supposed to pay off. With its new headquarters in Salt Lake City the company would have been able to expand fast to compete with major telecoms operators such as Cables and Comcast. Waco had also been an important player in recent periods in a number of cable and telecoms contracts, such as VCD & Cable which we will discuss shortly.
The Waco merger and its effects
Waco made a number of major move as part of a merger that would see it sell its existing TV advertising business to an outside entity. Waco had a number of key players such as the Chicago Tribune (http://www.wc.org/public_library/publications/c_c_d_11-0021_mj.htm) and the Waco Tribune. This was one of the factors behind a series of announcements such as the acquisition of Tribune Communications in May 2000. The merger was actually not an all or nothing deal (Wikipedia, 27 July 2000). What mattered, is the price difference between US West and Global West. In short, it would not take me five years to figure this out. After a large round of media coverage by ESPN, Time Warner (USA), AT&T, Charter, Time Warner, Time Warner Cable, Cable Communications, Verizon, AT&T-owned Verizon Wireless Corporation and other media giants, The Waco merger would not happen but Waco would be an important move in the company’s long run to sell its remaining TV advertising business in the face of price increase.
The merger was also a big deal for several other companies, such as T-Mobile (http://www.tmobile.com) and Time Warner Cable and other media giants. Here is only a small portion of the massive media coverage that Waco had already generated. T-Mobile received an initial offer of $17.6 billion for a combined $14.3 billion deal, more than double that of Waco. T-Mobile had an initial offering of $1.2 billion for its $14 billion deal that was made publicly available (Waco, 24 July 2000). All of the major media outlets saw this deal as an opportunity to make an immediate push to get Waco back into the TV segment (Waco, 10 November2000). As T-Mobile grew by more than 7% to $20 billion, and as Time Warner Cable received a $2.5 billion takeover offer from the cable and broadcast giants, Waco and the other big TV media deals seemed more appealing than the first $11 billion one.
The merger of the largest media media companies, with a combined $7.6 billion in revenues, represented a huge boost to the already heavily-warded network’s brand. But as the network continued to grow, those who enjoyed an even greater boost were less prepared to go on television.[10] There was a shift in the media landscape, with an increasing number of television stations having either been bought off from other networks or were rebranded as broadcast media.[11]
At this point, Fox News was looking to cut its television advertising revenue. With almost half of its ad expenditure on television being funded by the pay-per-view fee (PPV), Fox News pulled out all the stops to reduce its revenue. Its biggest competitor, the Times-CBS affiliates, also started cutting their television advertising budget, by 3%). T-Mobile, though, had a better deal with advertisers and the media conglomerates that covered it, a more stable overall image and brand profile, with a larger TV ad spend.[12-14]
Although the merger came with a $5 billion offer that was given to Time Warner Cable, Waco was an attractive offering for TV companies.
On the other hand, if the merger came as a huge deal to Waco shareholders or just a surprise to their shareholders, then the loss from the merger would have been far sweeter in hindsight.
On 12 September 2000, Time Warner Cable was asked to pay $30.8 billion in “compensation” over a two-year period, and the transaction involved T-Mobile, a major television company, making a $17.6 billion payment.
It was this $34.7 billion bid that was the first major deal from the Time Warner Cable company, with no other changes to pay. T-Mobile was only the third big TV company to make large payments in 2000 to pay off its $44.7 billion debt.[15]
T-Mobile was the last company to agree to pay back the $1.2 billion owed to Time Warner Cable but had not agreed to pay back the remaining $3 billion owed by Time Warner Cable.[16]
The transaction also came with a $12 billion debt, of which Time Warner Cable was responsible for a portion. The deal that made Waco the only major TV company with a significant percentage of its cash on hand owed to T-Mobile that $10.8 billion.
On the other hand, if the $10.8 billion was the beginning of the end, if the deal involved Time Warner Cable paying off the remaining $7.6 billion, that still would come to approximately $7.5 billion as Waco was still on cable by that time.[17]
[6] A few months prior to the deal between Time Warner Cable (http://www.timeblu.com) and Fox News, Waco had filed for Chapter 11 bankruptcy protection with the Delaware Court of Common Pleas, which required T-Mobile to pay an $11.3 billion principal balance and $16.3 million interest of $9.8 billion.
This balance owed to both Fox Broadcast Networks and Time Warner Cable by that time had been at $8.2 billion. The remainder, about $4 billion at that time, was
If the merger happened this would not only make the merger a big win for Waco, it would mean that it would give us a new face for the company and it would give us a fresh starting point to push Waco into more channels. In this regard Waco was at least as important to Time Warner Cable as the new T-Mobile, Verizon, Charter, Time Warner Cable and other media giants. This change should further create a brand new channel to push Waco into new TV (Waco, 6 April 2000). In some ways, T-
\
Global Marine
\
When the company was taken over in 2001, it merged with Waco Inc. We have talked a long time about this (Wikipedia, 2008). We will talk now about this merger and how it was supposed to pay off. With its new headquarters in Salt Lake City the company would have been able to expand fast to compete with major telecoms operators such as Cables and Comcast. Waco had also been an important player in recent periods in a number of cable and telecoms contracts, such as VCD & Cable which we will discuss shortly.
The Waco merger and its effects
Waco made a number of major move as part of a merger that would see it sell its existing TV advertising business to an outside entity. Waco had a number of key players such as the Chicago Tribune (http://www.wc.org/public_library/publications/c_c_d_11-0021_mj.htm) and the Waco Tribune. This was one of the factors behind a series of announcements such as the acquisition of Tribune Communications in May 2000. The merger was actually not an all or nothing deal (Wikipedia, 27 July 2000). What mattered, is the price difference between US West and Global West. In short, it would not take me five years to figure this out. After a large round of media coverage by ESPN, Time Warner (USA), AT&T, Charter, Time Warner, Time Warner Cable, Cable Communications, Verizon, AT&T-owned Verizon Wireless Corporation and other media giants, The Waco merger would not happen but Waco would be an important move in the company’s long run to sell its remaining TV advertising business in the face of price increase.
The merger was also a big deal for several other companies, such as T-Mobile (http://www.tmobile.com) and Time Warner Cable and other media giants. Here is only a small portion of the massive media coverage that Waco had already generated. T-Mobile received an initial offer of $17.6 billion for a combined $14.3 billion deal, more than double that of Waco. T-Mobile had an initial offering of $1.2 billion for its $14 billion deal that was made publicly available (Waco, 24 July 2000). All of the major media outlets saw this deal as an opportunity to make an immediate push to get Waco back into the TV segment (Waco, 10 November2000). As T-Mobile grew by more than 7% to $20 billion, and as Time Warner Cable received a $2.5 billion takeover offer from the cable and broadcast giants, Waco and the other big TV media deals seemed more appealing than the first $11 billion one.
The merger of the largest media media companies, with a combined $7.6 billion in revenues, represented a huge boost to the already heavily-warded network’s brand. But as the network continued to grow, those who enjoyed an even greater boost were less prepared to go on television.[10] There was a shift in the media landscape, with an increasing number of television stations having either been bought off from other networks or were rebranded as broadcast media.[11]
At this point, Fox News was looking to cut its television advertising revenue. With almost half of its ad expenditure on television being funded by the pay-per-view fee (PPV), Fox News pulled out all the stops to reduce its revenue. Its biggest competitor, the Times-CBS affiliates, also started cutting their television advertising budget, by 3%). T-Mobile, though, had a better deal with advertisers and the media conglomerates that covered it, a more stable overall image and brand profile, with a larger TV ad spend.[12-14]
Although the merger came with a $5 billion offer that was given to Time Warner Cable, Waco was an attractive offering for TV companies.
On the other hand, if the merger came as a huge deal to Waco shareholders or just a surprise to their shareholders, then the loss from the merger would have been far sweeter in hindsight.
On 12 September 2000, Time Warner Cable was asked to pay $30.8 billion in “compensation” over a two-year period, and the transaction involved T-Mobile, a major television company, making a $17.6 billion payment.
It was this $34.7 billion bid that was the first major deal from the Time Warner Cable company, with no other changes to pay. T-Mobile was only the third big TV company to make large payments in 2000 to pay off its $44.7 billion debt.[15]
T-Mobile was the last company to agree to pay back the $1.2 billion owed to Time Warner Cable but had not agreed to pay back the remaining $3 billion owed by Time Warner Cable.[16]
The transaction also came with a $12 billion debt, of which Time Warner Cable was responsible for a portion. The deal that made Waco the only major TV company with a significant percentage of its cash on hand owed to T-Mobile that $10.8 billion.
On the other hand, if the $10.8 billion was the beginning of the end, if the deal involved Time Warner Cable paying off the remaining $7.6 billion, that still would come to approximately $7.5 billion as Waco was still on cable by that time.[17]
[6] A few months prior to the deal between Time Warner Cable (http://www.timeblu.com) and Fox News, Waco had filed for Chapter 11 bankruptcy protection with the Delaware Court of Common Pleas, which required T-Mobile to pay an $11.3 billion principal balance and $16.3 million interest of $9.8 billion.
This balance owed to both Fox Broadcast Networks and Time Warner Cable by that time had been at $8.2 billion. The remainder, about $4 billion at that time, was
If the merger happened this would not only make the merger a big win for Waco, it would mean that it would give us a new face for the company and it would give us a fresh starting point to push Waco into more channels. In this regard Waco was at least as important to Time Warner Cable as the new T-Mobile, Verizon, Charter, Time Warner Cable and other media giants. This change should further create a brand new channel to push Waco into new TV (Waco, 6 April 2000). In some ways, T-
In March of 2000 Leo Hindery became the CEO of the company during this time the stock of the company went from 61 dollars to 25 dollars a share in a months time. By November of 2001 the companys shares were down to five dollars a share (Wikipedia, 2007).
One of the legal issues that Global Crossings faced was the investigation by the SEC (Security and Exchange Commission) for illegal accounting practices. It was said that the company used paper transactions to pad its books. These paper transactions were transactions that no goods or services were exchanged, but instead were just generated to make it look like the company was making a profit (Gutman, 2002). In April of 2005, the SEC settled with Global Crossings. The SEC stated that while Global Crossings did not comply with certain reporting obligations it cooperated fully with the SEC investigation. According to the SEC no ” monetary penalty was assessed against the company, which neither admitted nor denied the allegations that it failed to disclose the extent to which its results depended on swaps of fiber-optic network capacity with other telecom companies ” (List, para.2,2007). Regulators imposed fines of $100,000 on three executives, which is a small amount compared to what this executives made in their insider trading. While Winnick admitted to no wrong doing, he agreed to pay back $30 million to settle company lawsuits. Winnick also paid out $25 million for employee retirement funds (List, 2007). The impact this had on the companys management planning was that it had to step back, re-group, and re-organize how the company reported its financial earnings.
One of the ethical issues that Global Crossing faced was, capacity swapping. “Capacity swapping is the act of two or more telecom companies swapping network capacity. In this way, the companies would simultaneously sell each other the right to use a part of their respective fiber-optic network, which in effect created a long-term lease allowing the other company to take control of part of the other companys network.” (List, para.4, 2007). What was unethical about this was that both the companies would report the selling of the rights to use the networks but they did not report the expense of buying the rights. Global Crossing added $375 million to