Take some money or move. Those are the choices being given to remaining workers at Interpath Communications, Inc., sources tell Local Tech Wire.
The Morrisville-based application service provider that emerged as one of the first Internet technology companies in the Triangle back in 1993. As a result of its merger with rival Annapolis, MD-based Usinternetworking, Interpath is giving about 110-or-so employees the option of accepting a severance package, terms of which the company declined to reveal, or remaining onboard and move to Annapolis with a pay bonus, according to several sources inside the company.
Last week, Interpath chief financial officer Lou Salamone publicly stated
that about 20 employees from its software application management services division will remain in the Triangle. Sources confirm that those positions mostly will be in sales.
Scott Frank, a spokesman for USi from Washington D.C.-based Ogilvy PR Worldwide, did not deny that information, saying that both firms have assembled a team that includes workers from each side’s staff to “address the specific requirements for most effectively integrating the two businesses.”
The company also declined to reveal what would become of its 90,000 square foot data center in Morrisville, which officials often refer to as “Mission Control” due to its rows of computer monitors and work stations that resemble the NASA communications facility.
“As part of this effort, they will be examining different options for making the best use of the two company’s resources, but we do not anticipate having a definitive answer for sometime,” Frank says.
Interpath Chief Executive Officer Joel Schleicher is handing over the leadership role to USi chief executive Andrew Stern in exchange for a seat on the company’s board of directors.
Officials at investment firm Bain Capital, which owns a majority stake in both Interpath and USi, orchestrated the deal but declined to comment. A statement issued by USi says the combined company is now the largest ASP in the world with more than 130 customers and close to $150 million in annual revenue.
In that statement USi chief executive Andrew Stern says: “This merger will enhance our financial strength, improve our ability to attract prospects and allow us to build on our leadership advantage.”
For years telecommunications service providers, such as BellSouth, Qwest Raleigh-based BTI, and Mebane-based Madison River Communications, have been cozying up to Interpath officials, flirting with buying the company.
Eventually, all of Interpath’s suitors walked away from future courtships when questions were raised regarding the company’s ability to roll out several virtual private services, which basically are security applications, that Interpath officials considered to be the key to its future success.
Nevertheless, Interpath continued to acquire companies that its leaders believed ultimately would boost the bottom line, most notably the August 2000 acquisition of Australia-based Alta Internet Business Centres, one of that country’s dominant ASPs. But even when Interpath appeared strong the company really was struggling to stay on its feet.
Progress Energy, the Raleigh-based power utility and Fortune 500 company, bought Interpath from Capitol Broadcasting Corp. in 1998 and proceeded to sink more than $150 million into the firm.
Officials at Progress Energy, which still holds a minority stake in Interpath, declined to comment on the current role it plays as the minority owner of the new USi.
In 2000, investment firm Bain Capital split a $100 million infusion in Interpath with Progress, which was then known as Carolina Power & Light, while at the same time Bain poured $106 million into USi — a move that immediately led industry observers to speculate of a possible merger between the rival competitors.
Bain then promised another substantial investment round if USi first would file for Chapter 11 bankruptcy protection — it was more than $262 million in debt — and merge with Interpath after reorganizing. USi officials accepted those terms and on May 22 the ASP’s issued a joint statement acknowledging that the merger had been completed. Usi also announced that it had received another $81 million from Bain Capital.
Analysts across the board agree the merger makes sense, although some say it could be more than a year before the new company begins to reap the benefits of its combined strengths.
Phil Wainwright, an analyst with Connecticut-based ASP News, says there is a lot of excitement in the software industry about Web services like those that will be offered by the combined USi.
“Vendors are making serious investments in that technology, too, but whether that will have an impact on the applications customers are deploying this year is another matter,” Wainwright says. “I think it depends on the type of application. Products in Web-intensive fields, such as content management, collaboration and messaging, e-commerce and e-business, already have quite a lot of Web services built into their makeup.”
Interpath once strived to be an all-in-one telecommunications service provider that combined local, long-distance and Internet services, as well as Web hosting and always available customer support, among other products and services.
Friday: Many former Interpath employees went on to start other ventures.
