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Windstream Bankruptcy: Partners React

Bankrupt

Chapter 11 bankruptcy is a hot topic in the channel with Windstream already in the process, Sungard Availability Services (Sungard AS) heading there next month and Fusion Connect considering it.

At last week’s Channel Partners Conference and Expo, we walked the Expo Hall floor and asked attendees to share their thoughts on this unexpected wave of bankruptcy filings. Needless to say, it wasn’t tough to get partners to open up.

Some fear their commissions will be impacted, while others talked about what’s driving some companies to chapter 11, and why bankruptcy could be a growing trend for the channel in the months ahead.

Michelle Doerr, Common Sense Technologies’ director of operations, said her company is going to be impacted because it works with Windstream and Fusion.

“We have seen it happen in the past with a couple of other companies and we did see them actually reorganize, so we’re hopeful that they’re able to get it figured out and be able to move on, but obviously the thing that would most impact us the most is our commissions, and that definitely is worrisome,” she said. “[If there are more bankruptcies], I guess the future of our business is really on the line at that point, but it seems that a lot of times it kind of works itself out with M&A or buyouts, and hopefully they’ll be able to stay in business.”

John Ashton, Public Telephone Co.’s vice president, said his company has been able to avoid “some of the downfall” that some of the other carriers are experiencing.

Public Telephone Co.'s John Ashton

Public Telephone Co.’s John Ashton

“We were a little bit more ahead of the curve because we had moved away from almost every carrier that’s having issues — luckily, before it seemed to happen,” he said. “I don’t know why, we’ve just been very lucky that way. But watching it on a daily basis – and I know our CEO has been watching it as close as can possibly be – it’s a concern because it’s going to change the whole complexity of the industry over the course of the short term and long term. In an industry with a small universe, anybody shaken shakes everybody.”

John Busse, AbriaCloud Technologies‘ president, said a lot of what’s prompting the bankruptcy filings stems back to M&A.

“In the case of Windstream, they acquired a number of different companies … and what they wound up doing is they just acquired companies, but didn’t integrate anything,” he said. “So eventually your debt winds up taking over your business, and that’s why Windstream got themselves in trouble. Same thing with Fusion. Fusion was Cbeyond; Cbeyond went from a zero company to a company that was worth $780 million when they sold it, and then a couple of years later after Birch purchased them, Birch sold them to the consortium Lingo, which became Fusion, but they took a $780 million company and sold it for $300 million-plus.”

AireSpring is an example of a company that’s going to be strong in that “they don’t carry the debt, so their revenues are forward leaning” and it’s expanding its networks “based on the revenue they have coming in, rather than trying to buy a marketplace,” Busse said.

“My worry is with …

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