NorthPoint Communications

NorthPoint Communications Group, Inc. was a United States telecommunications company focused on competitive local exchange services and data transmission over digital subscriber lines (DSL). Established in 1997 by Michael W. Malaga and five other former executives of Metropolitan Fiber Systems, the company emerged during a period when alternative carriers were attempting to compete with incumbent telephone operators by deploying broadband access and other communications infrastructure. NorthPoint developed relationships with a broad group of technology, telecommunications, networking, and distribution companies. Those relationships included Microsoft, Tandy Corporation, Intel, Verio, Cable & Wireless, Frontier Corporation, Concentric Network, ICG Communications, Enron, Network Plus, and Netopia. The company also received investment from venture-capital and private-equity firms including The Carlyle Group, Accel Partners, Benchmark, and Greylock Partners. The company became publicly traded during the peak of the dot-com and telecommunications investment cycle. On May 5, 1999, NorthPoint completed an initial public offering on Nasdaq, selling 15 million shares at $24 per share under the symbol NPNT. The offering gave the company access to public-market capital for expansion, while also placing it under greater pressure to grow revenue and maintain financial performance in a rapidly changing broadband market. In September 2000, Verizon agreed to acquire a 55 percent interest in NorthPoint and combine the companies' DSL businesses. The proposed transaction was intended to align Verizon's incumbent telecommunications scale with NorthPoint's competitive DSL operations. It did not close. In November 2000, NorthPoint restated its third-quarter financial performance after customers failed to pay their bills, reducing reported revenue from $30 million to $24 million. Verizon subsequently terminated the acquisition agreement, asserting that the restatement represented a material adverse change. NorthPoint challenged Verizon's decision in court and sought to compel completion of the transaction. The dispute was ultimately settled outside court in July 2002, when Verizon agreed to pay NorthPoint $175 million. Following the failed merger, NorthPoint said it would reduce its workforce by 19 percent, or 248 jobs, as part of an effort to lower expenses. The company filed for bankruptcy in January 2001, reflecting the severe financial pressures affecting alternative telecommunications carriers and broadband providers at the time. Some internet service providers whose customers faced possible service interruptions criticized banks for not reaching an arrangement to preserve the business. In March 2001, AT&T acquired NorthPoint's assets for $135 million in a liquidation transaction. NorthPoint therefore ended as an independent company, leaving its principal historical significance in the early development of competitive DSL services and in the rapid rise and collapse of telecommunications businesses during the dot-com era.

NorthPoint Communications was founded in 1997 by Michael W. Malaga and five other former executives of Metropolitan Fiber Systems. Its business model centered on competitive local exchange telecommunications and DSL-based data transmission. The company operated in the context of a late-1990s communications market in which alternative carriers sought to challenge incumbent telephone companies by building broadband networks and supplying connectivity to internet service providers and other partners. NorthPoint established commercial relationships with companies spanning software, computing, networking, telecommunications, and distribution. Reported relationships included Microsoft, Tandy Corporation, Intel, Verio, Cable & Wireless, Frontier Corporation, Concentric Network, ICG Communications, Enron, Network Plus, and Netopia. Its investment base included The Carlyle Group, Accel Partners, Benchmark, and Greylock Partners. The company went public on May 5, 1999, during the dot-com boom. Its Nasdaq initial public offering sold 15 million shares at $24 per share under the symbol NPNT. The public offering supplied capital for a business that required network investment and customer growth, but it also exposed NorthPoint to the market's heightened expectations for rapidly expanding telecommunications companies. In September 2000, Verizon agreed to acquire a 55 percent interest in NorthPoint and merge the companies' DSL businesses. The proposed combination would have connected Verizon's scale and incumbent infrastructure with NorthPoint's competitive DSL operations. Before the transaction was completed, however, NorthPoint disclosed that customers had failed to pay their bills. In November 2000, the company restated its third-quarter revenue downward from $30 million to $24 million. Verizon treated the change as a material adverse change and terminated the acquisition agreement. NorthPoint sued Verizon in an effort to force the transaction to proceed. The dispute did not reach a trial judgment establishing completion of the merger. Instead, the parties settled outside court in July 2002, with Verizon agreeing to pay NorthPoint $175 million. NorthPoint also announced a workforce reduction of 19 percent, equivalent to 248 jobs, after the failed merger in an effort to reduce expenses. The company's financial difficulties continued, and NorthPoint filed for bankruptcy in January 2001. The bankruptcy created concerns among internet service providers and their customers about possible service disruption. Some providers blamed banks for failing to arrange a rescue or restructuring that could have preserved the company. In March 2001, AT&T acquired NorthPoint's assets for $135 million through a liquidation transaction. NorthPoint ceased to operate as an independent company. Its history illustrates both the early commercial expansion of DSL broadband and the vulnerability of highly leveraged or rapidly expanding telecommunications businesses during the collapse of the dot-com-era market.

• 2002

  Settlement with Verizon

  [1]NorthPoint Communicationsen.wikipedia.org

  The dispute over Verizon's terminated acquisition agreement ended in an out-of-court settlement under which Verizon agreed to pay NorthPoint $175 million.

• 2001

  Bankruptcy and asset liquidation

  [1]NorthPoint Communicationsen.wikipedia.org

  NorthPoint filed for bankruptcy in January, and AT&T acquired its assets for $135 million in March.

• 2000

  Verizon proposes majority investment and DSL combination

  [1]NorthPoint Communicationsen.wikipedia.org

  Verizon agreed to acquire a 55 percent interest in NorthPoint and merge the companies' DSL businesses.

• 2000

  Financial restatement and failed transaction

  [1]NorthPoint Communicationsen.wikipedia.org

  NorthPoint reduced reported third-quarter revenue from $30 million to $24 million after customer nonpayment, after which Verizon terminated the proposed acquisition.

• 1999

  Initial public offering

  [1]NorthPoint Communicationsen.wikipedia.org

  NorthPoint became publicly traded on Nasdaq on May 5, selling 15 million shares at $24 per share under the symbol NPNT.

• 1997

  Company founded

  [1]NorthPoint Communicationsen.wikipedia.org

  Michael W. Malaga and five other former Metropolitan Fiber Systems executives founded NorthPoint Communications.

NorthPoint positioned itself as a competitive alternative to incumbent local telephone carriers, concentrating on DSL-based broadband and data transmission services and working through relationships with internet service providers, technology companies, and telecommunications operators.

• Telecommunications and broadband

  DSL data transmission services

  NorthPoint's core offering was data transmission using digital subscriber line technology. The company built and operated competitive telecommunications capacity intended to support broadband connectivity and relationships with internet service providers and other network participants.

• Telecommunications infrastructure · 1997

  Competitive local exchange services

  As a competitive local exchange carrier, NorthPoint provided telecommunications services intended to compete with incumbent local exchange operators. Its activities were closely associated with DSL deployment and wholesale or carrier-oriented network access.

• 2002

  Settlement of Verizon litigationOther

  Background

  NorthPoint sued Verizon after Verizon terminated the proposed acquisition, seeking to compel completion of the transaction.

  Action taken

  The parties settled out of court, with Verizon agreeing to pay NorthPoint $175 million.

  Aftermath

  The settlement resolved the acquisition dispute without completion of the proposed merger.

  Settlement payment. $175 million (July 2002)

  Source

• 2001

  Bankruptcy filing and workforce reductionOther

  Background

  The collapse of the Verizon transaction and customer payment problems intensified NorthPoint's financial pressure.

  Action taken

  NorthPoint filed for bankruptcy and announced a 19 percent workforce reduction, representing 248 jobs, to reduce expenses.

  Aftermath

  The company proceeded toward liquidation, while internet service providers raised concerns about possible service interruptions.

  Workforce reduction. 248 jobs, or 19% of the workforce (After the collapse of the Verizon merger; reported in the company's bankruptcy period)

  Source

• 2001

  AT&T acquisition of NorthPoint assetsM&A

  Background

  NorthPoint entered bankruptcy and its network and other assets were offered through a liquidation process.

  Action taken

  AT&T acquired NorthPoint's assets for $135 million in March 2001.

  Aftermath

  NorthPoint ceased to exist as an independent operating company.

  Asset acquisition value. $135 million (March 2001)

  Source

• 2000

  Proposed Verizon majority investment and DSL mergerM&A

  Background

  Verizon sought to combine its telecommunications scale with NorthPoint's competitive DSL operations.

  Action taken

  Verizon agreed to acquire a 55 percent interest in NorthPoint and merge the companies' DSL businesses.

  Aftermath

  The agreement was terminated after NorthPoint restated third-quarter revenue downward. NorthPoint sued, and the dispute was later settled.

  Source

• 1999

  Public-market expansion through an initial public offeringStrategy

  Background

  NorthPoint needed capital to expand its competitive DSL and telecommunications operations during the late-1990s broadband and dot-com investment boom.

  Action taken

  The company sold 15 million shares in a Nasdaq initial public offering at $24 per share and traded under NPNT.

  Aftermath

  The offering made NorthPoint a public company, but the business later encountered severe financial and customer-payment problems.

  Initial public offering. 15 million shares sold at $24 per share (May 5, 1999)

  Source

1. 1NorthPoint Communicationsen.wikipedia.org