With Buyers Not Yet at Hand, Cbeyond Churns Ahead

It’s been a bit over four months since Cbeyond announced it would be looking at strategic alternatives, and checking on just where that process is was at the top of the market’s list with their Q4 report yesterday. But the news is that there is no news on the inorganic front, and may not be for a while yet.

One potential buyer that I have heard mentioned lately that makes a lot of sense is MegaPath. Not only are the customer fit pretty good and the likely synergies attractive, but it could give MegaPath a back door to a public listing. It’s been four years now since Covad, SpeakEasy, and the original MegaPath united under one banner, and the private equity guys behind them are surely ready for a new chapter.

At least, it makes more sense to me at the moment than Earthlink (has its own troubles at the moment), TWC or Comcast (busy, maybe next year), XO (I’ll believe it when I see it), or Windstream (western fiber seems more likely).  In the meantime, the long, winding road to the clouds will have to suffice, and who knows maybe they’ll find a target of their own to speed things up.

In terms of quarterly financials Cbeyond probably didn’t surprise anyone. Total revenues of $111.5M were down sequentially but about where they should have been. The company is churning off legacy revenues while ramping up its ‘2.0’ business. The latter saw a powerful 81.1% growth over the same quarter last year, but has yet to crack 20% of the total just yet.

EBITDA fell slightly to $17.7M as gross margins dipped below 65%, while free cash flow of $3.6M was up slightly. Earnings per share came in a penny under estimates, but basically in line with expectations.

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Categories: CLEC · Financials · Mergers and Acquisitions