What is PSINet, and why is it inflicting its name on our football stadium?
These are the questions that have fallen from the lips of many a pundit and sports fan since it leaked out last week that Camden Yards' purple-seated pigskin palace will be known henceforth -- or at least for the next 20 years -- as PSINet Stadium.
To take the first question first, PSINet Inc. is a Herndon, Va., Internet global network company that posts deepening losses despite booming sales figures. In addition, it is widely seen as a juicy acquisition target in an industry rife with merger activity.
PSINet is betting that the $105.5 million it is paying to put its name on the stadium will give a significant boost to the company's public profile.
"These guys have been trying to get their name out at the marketplace for a long time now," said William Klein, an analyst with Wasserstein Perella Securities Inc. in New York.
PSINet sells businesses access to its high-speed, worldwide network, which can be used for voice, video and fax traffic as well as Internet messages. About a third of PSINet's 2,000 employees live in Maryland, and the company just opened a small regional office in downtown Baltimore.
There are other, much larger companies that offer services similar to PSINet's, such as AT&T; Corp. and MCI WorldCom Inc., but PSINet occupies an unusual niche in the crowded telecommunications network marketplace.
In an industry that has been transformed by mergers and increasingly dominated by huge, diversified conglomerates, PSINet is one of the few independent network companies left.
That independence may not last long. Analysts said there are plenty of telecommunications companies that would be interested in taking over PSINet. Rumored suitors include AT&T; Corp., Qwest Communications International Inc., British Telecommunications PLC and Cable & Wireless PLC.
Vik Grover of Kaufman Brothers LP in New York said an acquisition of PSINet is likely. "They are the last property out there," Grover said. "If you're a Qwest or British Telecom and you want to get a global ISP [Internet service provider], it's the only one."
Which raises a question. If PSINet is bought, does the football stadium shed the PSINet name and take on another one? Qwest Stadiwm, anyone? Or how about British Telecom Scrum Pitch at Camden Yards?
PSINet spokesman Michael P. Binko said the contract with the Ravens allows the company -- or anyone who buys it -- to change the name.
William L. Schrader, PSINet's chairman and chief executive officer, said his company could be bought -- at a high premium over its current stock price.
"He [Schrader] has pretty grandiose dreams and visions for his company, so I'd be surprised if he sold out in the near term," said Thomas Byrne of Periscope Analytics Inc., a New Jersey equity research firm that studies small high-technology companies.
Those dreams and visions go some distance in explaining why Schrader's company has ponied up nine figures to put its name on one of the state's largest and most prominent structures.
Founded in 1989, PSINet has grown strongly, buoyed by both the surging demand for network service and an aggressive acquisition strategy; the company snapped up 15 other network firms in 1998 alone. "We're in the business of buying companies," Schrader said.
PSINet has seen its annual revenue rise from $38.7 million in 1995 to $121.9 million in 1997, the last full year for which figures are available.
However, in true Internet Gold Rush style, PSINet is spewing out money faster than it sucks it in. In its most recent reported quarter, which ended Sept. 30, the company tallied a net loss of $47.4 million. In the same quarter of 1997, the company's shortfall was $10.7 million.
Of course, vast bays of red ink are nothing unusual in the Internet world, and investors and analysts have developed a remarkable ability to regard hemorrhaging balance sheets with calm.
On Dec. 29, 1997, PSINet stock stood at a humble $4.50. Now, just over a year later, it trades for eight times as much. The company said it raised more than $1 billion in capital last year.
"The losses don't really bug me at all," said analyst Klein, who is advising clients to buy PSINet stock. "That's not what I'm looking at. I'm looking at the strategic approach."
That strategic approach calls for cobbling together a sizable network and cramming it with as much traffic as possible. The company's losses are due in large part to the acquisitions and build-outs it has undertaken to assemble its network; the deal with the Ravens is intended to bring more users onto that network.
PSINet is establishing a Ravens online service where fans can do all the typical fan-club stuff, such as reading team news and buying logo-festooned gear.
However, the service will also allow users access to the broader Internet. In a high-technology market where customers are fickle and fiercely contested, PSINet is hoping that loyal Ravens fans will form a consistent core of Internet-service subscribers.
PSINet is looking to set up similar arrangements with other professional sports teams.
"We would like to export as much of this as we can," Schrader said.
Pub Date: 1/31/99