You Say $22 billion, I Say $2 billion

Some of the great buys of all time were picked out of the rubble of the Savings & Loan collapse of 1989-1990. The great Telecom collapse of 2001-2002 presents a similar opportunity. And the bidding down of what were once highly valued assets has accelerated. Today's Wall Street Journal reports that Global Crossing, which listed $22 billion in assets in its filing for bankruptcy protection, is viewed by some to be worth only $1 billion or $2 billion. Since the WSJ site requires a subscription, I'll quote from the article here:

"When Global Crossing Ltd. filed for bankruptcy protection last month, it listed $22 billion in assets -- but the onetime fiber-optic darling may be valued at $1 billion to $2 billion, people familiar with its books say.

"As other telecommunications companies that have filed for bankruptcy protection have learned, the industry as a whole is reeling from a brutal re-evaluation of its worth. In this environment, a number of industry analysts and experts are questioning what the actual value of the Bermuda-based company is, and some of them are arriving at five to 10 cents on the dollar. A big reason is the glut that resulted when firms rushed into the field, spending billions of dollars to build millions of miles of fiber-optic capacity that remain largely unused.

"'For the network itself, the network has little value because there is so much of it everywhere,' says Susan Kalla, an analyst at Friedman Billings & Ramsey in New York. Ms. Kalla points out that while the company has business customers that have value, the network itself costs a considerable amount to operate because it is expensive to maintain."

Miles and miles of unlit fiber in a glutted market are indeed worthless, in the near term. But does anyone doubt that as the "last mile" issues are solved and more and more people use more and more bandwidth, that Global Crossing's fiber network will not be a valuable asset? Of course it will be.

The only offer on the table right now for Global Crossing is for roughly $750 million. If the low bidders win the company at that price, we could be talking about the steal of the century.