It looks like it's game over for Metricom and its cutting-edge wireless Internet access network.
Metricom will shut down its Ricochet network in all of its markets during the next week and lay off 282 employees, according to a statement released by the San Jose, Calif.-based company. Additionally, Metricom will place all of its assets on the auction block in two weeks.
The news comes two days after the company announced the appointment of Kevin Dowd as CEO, replacing interim-chief Ralph Derrickson, and almost exactly one month after Metricom filed for Chapter 11 bankruptcy protection.
In the Chapter 11 announcement, the company revealed that it had appointed Dowd, a principal of consulting firm Nightingale & Associates, as chief restructuring officer to "evaluate options for financing the company's continuing operations, as well as other strategic alternatives."
"It is clear to me that Metricom's wireless Internet access product is viable and that its Ricochet service offering provides the fastest mobile wireless communications solution on the market today," Dowd said in a statement at the time.
While the company's ideal solution would have been to find a source of financing in order to pay its $1 billion debt, Friday's news suggests that Metricom was unable to find any saviors.
A posting on Metricom's Web site states that the company will be holding a public auction on the morning of Aug. 16th. Among the items available to the highest bidder are the entire Ricochet wireless network, which consists of 17 wired cities, the company's patents, its spectrum and its subscribers. These items are available as a complete package, or a la carte.
Some Metricom customers are already reporting that they are no longer able to access the Internet via the Ricochet network. Metricom representatives were unavailable to comment further.
Metricom has been in makeover mode since its inception. Founded in 1985 as a company that would give utility companies a way to automatically read gas and electric meters, the company soon changed course, choosing to offer wireless Internet access to laptop users. In 1999, the company began to upgrade its 28.8Kbps wireless network to 128Kbps speeds, more than twice as speedy as the fastest dial-up Internet connection.
By the end of the first quarter of this year though, Metricom counted only a paltry 40,900 names on its subscriber logs. To make matters worse, the company saw its chairman and CEO, its CFO and its senior VP of engineering all walk out the door within a month of one another.
Explanations for Metricom's dismal performance vary widely. Merrill Lynch analyst Christopher Giordano blames the company's wholesale model, which left Metricom at the mercy of a handful of resellers such as WorldCom and Juno. If these resellers didn't push Metricom's service hard enough, Giordano said, Metricom could not grow.
Others said Metricom was going after the wrong people the whole time. "If you look at their advertising campaigns, they were primarily targeting the consumer," explains Mobilocity CTO Omar Javaid. This proved problematic given the service's hefty $75 monthly fee. Vertical markets such as police departments and the health care sector would have been a better fit, Javaid contends.
A bungled deployment strategy didn't help matters. In February, Metricom scaled back its original plans for offering high-speed wireless service in 46 cities to 13 cities. The change in plans cost Metricom $88 million, which was squandered on half-built networks.
Metricom's shares were unchanged at $1.82 on Friday. The company's stock symbol now carries the letter Q at the end of it, which Nasdaq adds to all companies in the midst of bankruptcy proceedings.
Ironically, the concept of wireless Internet networks is one of the hottest areas in the telecommunications industry today. Earlier this week, Microsoft and Intel both announced they would throw their weight behind the popular 802.11b wireless standard by joining the board of directors of industry group WECA (Wireless Ethernet Compatibility Alliance).
Meanwhile, all the major wireless carriers, such as AT&T Wireless, Cingular and Verizon Wireless are racing to offer next-generation wireless networks that would bring enhanced Internet connections to people's cell phones. Earlier this month, AT&T Wireless launched its first such network for business customers in Seattle.
"We committed to bring customers advanced wireless services that are affordable and easy to use, and today we are delivering on that promise," said Mohan Gyani, president and CEO for AT&T Wireless' mobility unit in a statement for the announcement.
