Digex Inc., an Internet company in Laurel whose troubles have been eclipsed by those of its majority investor, WorldCom Inc., announced yesterday that it will explore a possible sale.
The company, which hosts corporate Web sites and e-mail, said its board of directors has retained the Boston investment bank Lane, Berry & Co. International LLC to explore "strategic options," including a sale.
"We believe the retention of a respected investment bank is in the best interests of the company and will be welcomed by all of our constituencies," George Kerns, Digex president and chief executive officer, said in a statement.
The company's woes reflect the past year's wreckage in the telecommunications and Internet sectors. Digex was bought at an inflated price last year by WorldCom, the long-distance phone giant that has since filed for Chapter 11 bankruptcy protection amid one of the largest corporate accounting scandals in U.S. history.
Digex has continued to receive infusions of cash from WorldCom but reported losing $119 million in its second quarter, double the loss of a year earlier. It is due to report third-quarter earnings today.
Digex laid off 200 employees last summer. It now employs about 825, down from 1,400 roughly a year ago.
The company's stock moved to Nasdaq's small cap market in September after its shares dropped below $1 in April and remained there. Nasdaq has said the stock will be delisted if it doesn't exceed $1 a share by Dec. 4.
Digex's shares gained 9 cents yesterday, or nearly 35 percent, to close at 35 cents.
In spite of the company's problems, Andrew M. Schroepfer, an analyst for Tier 1 Research in Minneapolis, believes Digex could fetch upward of $200 million because it is generating about that much annual revenue, has cut costs and retains a strong list of corporate clients.
"They're trading at a ridiculously low level in my opinion," Schroepfer said. "Any company that has some kind of financial structure would be foolish not to consider it."
WorldCom, Digex's largest shareholder with about 80 percent of the shares, said it supports the company's move toward a possible sale.
WorldCom bought Digex's parent company, Intermedia Communications Inc., last year for stock and debt valued at $4 billion. The company's market value now is less than $9 million.