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Based on their
strategic transformation over the last 12 months, Globix
Corporation has become a pure-play, debt-free, public, fiber optic based network
services company that operates in the Northeast and mid-Atlantic regions
2200 West Park Drive
Westborough, MA 01581
Kurt Van Wagenen
President and CEO
Interview conducted by:
Lynn Fosse, Senior Editor
Published - February 15, 2007
Kurt Van Wagenen is the President and Chief Executive Officer of Globix Corporation.
Mr. Van Wagenen joined the Company in March 2001.
Prior to Globix, Mr. Van Wagenen served in various roles at Verizon Communications,
including Director of Consumer Sales and Service, Director of Corporate Strategy, and
Director of Merger Integration. Prior to Verizon, Mr. Van Wagenen served in various
positions at NYNEX Corporation, including Director of New Business Development and
Director of Marketing Strategy.
Mr. Van Wagenen has a M.B.A. from the Harvard Business School and a B.S. from the
Rensselaer Polytechnic Institute. He is a chartered financial analyst.
NEON Communications, Inc., a subsidiary of Globix Corporation (AMEX:GEX), is a
facilities-based wholesale communications provider, supplying high bandwidth fiber optic
capacity and comprehensive end-to-end telecom services to communications companies and
enterprise customers on an intercity, regional and metro network in the 12-state Northeast
and mid-Atlantic regions. With 4,800 route miles and over 230,000 fiber miles from Maine
to Virginia, NEON is providing unparalleled capillarity and central office connectivity in
the world's most demanding telecom market.
CEOCFO: Mr. Van Wagenen, I would like to say
congratulations as you have recently become CEO of Globix; tell us about your background
with the company and where you see it going under leadership.
Mr. Van Wagenen: Thank you Lynn. I
joined NEON in 2001, as vice president of network operations. In 2005, NEON merged with
Globix Corporation and in January of this year, I was promoted to CEO of Globix, which
includes NEON Communications. Prior to joining NEON, I was with Verizon Communications
(NYSE: VZ). My experience is largely engineering and operations and that is
certainly one of the reasons why I was appointed to this new position. We are a strong
technology company. We provide services to all of the major carriers and
telecommunications companies in our footprint, which extends from Maine to Virginia. Our
customers are all blue chip companies with high expectations around service and support.
We have had significant growth over the last several years, in excess of 20% a year on a
revenue basis and that is with a very constrained capital program and a rather challenging
balance sheet. This year, we are in a much stronger financial position. Over the past six
months, we have sold our hosting businesses in the US and UK as well as a building in New
York City, which came from the Globix side of our merger. We were able to pay off
substantially all of our debt and are now a debt-free, public company with cash in the
bank and have the ability to spend more money investing in our network, investing in our
business and pursuing what we believe are significant growth opportunities going
What is the focus for Globix today?
Mr. Van Wagenen: Globix is now NEON
Communications. We own a fiber-optic network that extends from Maine to Virginia. We sell
high capacity bandwidth services to major telecommunications companies and large
What is your growth strategy?
Mr. Van Wagenen: We are looking to
grow in three areas. First, we are looking to add new locations to our network within our
existing region, what we call deepening our capillarity as well as expand
contiguously beyond our existing footprint. Secondly, we are looking to add new customer
segments such as enterprise customers. Enterprise customers currently make up a relatively
small percent of our revenue base, so we believe there is a great opportunity for us to
grow in this area. We also believe there is an opportunity with hospitals and universities
in our region. The third area is to add new products. We are actively exploring
opportunities to enhance our existing Ethernet offering as well as several other products
that will add incremental revenue.
You mentioned hospitals and universities; is there a trend for them to go through networks
such as yours?
Mr. Van Wagenen: I would not say that
it is a trend. I would say that hospitals and universities have significant data storage
needs and their use of technology increases year-over-year. They are dependent on
sophisticated networks to support them. We provide the underlying infrastructure that
supports their data networks.
Do the carriers have many options and if so why are they going with Globix?
Mr. Van Wagenen: In some markets, they
have options. For instance, what we call the NFL city routes, the tier-one routes, such as
from Boston to New York or New York to D.C. or D.C. to Philadelphia. Several carriers have
networks that connect those cities, so there is competition on those routes. When you get
out to tier-two and tier-three markets, such as Portland, Maine, Nashua, New Hampshire, New
London, Connecticut, and all the way down into Virginia there tends to be fewer
alternatives. That is where we excel.
Will you tell us more about how you plan to achieve your goals?
Mr. Van Wagenen: Our business has
changed dramatically over the last twelve months. We sold off our hosting businesses in
the US and UK and sold a building in New York City. The proceeds of those transactions,
which are in excess of $125 million, have been used to pay off substantially all of our
debt and allowed us to put money in the bank. We are in the best financial position that
we have ever been in as a company. We are coming off a year where we have had very good
growth, and we are positioned extremely well to take advantage of opportunities going
forward. We have a very stringent business case process that we use to deploy capital and
make investments in the network. We believe this financial discipline has put us in a
better financial position to pursue opportunities, whether it be new markets, new
customers, and new products.
As CEO, how do you ensure that the capital available now is used wisely?
Mr. Van Wagenen: There are two ways.
We do not want to go back to the days of the build it and they will come
mindset. We are in an industry where we have all been conditioned or battle hardened. Over
spending in the late 1990s and the early part of this century to build out the fiber
backbone networks led to us having to wait for the revenue. As a result, many companies,
including NEON, took on significant debt levels that could not be supported going forward.
We were one of the companies that went through bankruptcy so we know the pain that is
experienced in not having the financial discipline around how to make profitable
investments in the network. We have been through the tough times and this experience has
instilled more financial discipline. Finally, our business case process has been used
successfully to grow our business for many years. We will continue to use this business
case process going forward. Our business cases are reviewed by a CapEx committee that
meets on a bi-weekly basis and evaluates every capital expenditure over $25,000. The
committee includes representation from all functional areas of the business. Sometimes we
will try to be creative and see if we can pursue an opportunity but minimize the
investment risk associated with it. In those cases, well break a project up into
multiple phases, and we will commit to spending a small amount of money to do the upfront
work such as licensing or applications for colocation. These items tend to be long
lead-time activities but are not all that costly. By phasing the project, we enable the
sales team to get out and market the new location to our customers. Once a sale is made,
we will approve the second phase of the project, which typically involves purchasing
equipment to light the location.
Do you need to add to your management team?
Mr. Van Wagenen: We are adding
some incremental staffing to support our growth. However, one of the nice things about
running a fiber-based network is that there is good operating leverage. Therefore, as we
grow, we do not need to add staffing at the same pace, which is a good thing. We are also
fortunate that we have not had a lot of turnover over the years, and we have some seasoned
veterans in our company that we have been developing and promoting over a period of
several years. I recently promoted three talented directors in our business to the
positions of vice president of engineering, vice president of sales and marketing, and
vice president of operations. We are also hiring in our finance organization. We recently
relocated our headquarters from New York City to Westborough, MA and are seeking good
finance personnel with public company experience.
Why should potential investors be interested and what do people miss about Globix that
should be recognized?
Mr. Van Wagenen: Post merger between
NEON and Globix, we became confusing to investors because we were really two separate
businesses. We had our NEON fiber based carrier business and we had the Globix hosting
business. We had data centers in California, New York, and in the UK, and we had a fiber
network from Maine to Virginia. When investors looked at Globix, they were trying to
figure out what we wanted to be when we grew up. Investors tend to be reluctant to invest
if the business is confusing. As a result of our strategic transformation over the last 12
months, we have become a simple, clean story. We are a pure-play, debt-free, public, fiber
optic based network services company that operates in the Northeast and mid-Atlantic
regions. It is a very easy business to understand. If folks read our financial releases
and see how we have repositioned the business, they are quickly going to be able to figure
out who we are and how we are performing. If investors believe that the business and
consumer thirst for information is going to continue to grow, whether in the form of voice
services, data services, or video services, then we are a very interesting company to look
at from an investment perspective. This is because we provide the core backbone network
necessary to deliver this information.
In closing, as CEO, what is your focus on a daily basis?
Mr. Van Wagenen: I spend the majority
of time with my people planning our strategy and making decisions about where we are going
to take the business and how we are going to grow the business. Because we are not a big
company and we do not survive based on our brand, our key to success is our ability to out
execute the competition and deliver services in a manner that meets our customer
requirements. I spend a lot of time with employees at all levels of the business, trying
to ensure that we are doing everything from a process, investment, and reporting
standpoint to flawlessly execute each time. In my new role as CEO, I will also spend more
time with our board of directors and with external stakeholders, trying to be more of the
face of the company.
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