NorthPoint Communications

Michael Malaga; who with five fellow entrepreneurs raised $ 582,000 to form NorthPoint Communications in June 1997. They started with a simple plan to sell high-speed fire access over phone production lines (DSL, digital subscriber line) to footling businesses in urban areas. NorthPoint aimed to reach 50% of subscribers by leasing lines at 10% of local Telcos tack to go farher sites.

        In August 1997 Accel Partners, benchmark Capital and Greylock put up $ 11 million for 33% in equity. NorthPoint ended 1998 with $ 931,000 in gross sales, $ 29 million in losses and $ 59 million in debt.

        Since the web was on the rise through 1999, NorthPoint eyed a public offering, which argue course cared little about profits that could come later. So NorthPoint changed its plan and focused on the metrics that Wall Street craved. Magala raised $ 530 million to build a bigger mesh topology and serve both businesses and consumers everywhere. He began doubling subscribers and revenue, letting losses mount. NorthPoint ended 1999 with $ 21 million in sales, $ 184 million in losses.

        NorthPoint paid the Bells $ 18 a month for each line and resold them to Internet process providers for as little as $ 35. The $ 17 left over barely covered network cost which, for the first nine months of 2000, ran $ 700 per subscriber per month. Serving other castigate sites costs them over $ 200 Million linking each switch to a node serving multiple Internet service providers a cost of $ 2,000 a month. By March 2000 NorthPoint had 41,300 users, accumulative losses of $ 295 million and $ 488 million in debt.

        Magala gave the assignment to NorthPoint death chair Elizabeth Fetter to look for an exist strategy. By August she had a deal with Verizon but since sales were down 20%, on November 29 Verizon backed out.



With no other rescuer give by March 2001 the network went dark. NorthPoint is sold to Michael Armstrongs AT&T for $ 135 million for the wirers and routers, but it ditched 87,000 customers. AT&T totally wanted piece parts.

        In 46 months of existence it had sales of $ 116 million, losses of $ 700 million and debt of $ 508 million. On its last leg it was free burning $ 66 million a month.

         This would have worked, it just now would have taken time. Michael Magala believed if NorthPoint would have stuck to its original strategy of serving businesses in denser markets. It might have made NorthPoint less gamey to The Streets, and the firm would have still been in business.

        

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