AboveNet Inc., based in White Plains and about to be taken over by Zayo Group of Louisville, Colo., reported higher first quarter earnings because of strong sales, especially in wide-area networking.
Earnings rose to $18.4 million, or 68 cents a share, from $14.5 million, or 54 cents, a year earlier. Revenue was up almost 12 percent, to $128 million from $114 million a year ago.
Revenue from foreign operations, mainly in the U.K., was up almost 20 percent. The company reiterated that it expects revenue for the year of $515 million to $525 million.
Profit margins rose, as did costs, but analysts said that was probably due to merger-related expenses.
AboveNet is in the process of being acquired by Zayo for $2.2 billion, or 84 cents a share. Shareholders of AboveNet will vote on the merger June 5. The deal is expected to close in mid- to late June.
Donna Jaegers, telecom services analyst at D.A. Davidson Co. in Denver, said Zayo had a very specific reason for buying AboveNet. “I think Zayo is looking forward to using AboveNet”™s expertise to widen its sales channel and also to try to tap into their enterprise connections. Above Net fills in a strong fiber network in the Northeast. And it”™s farther along in selling to enterprise customers. So I would think Zayo tries to follow in that track.” She did say she expects to see some cost cutting as well.
As for who will run the merged company, “both Dan Caruso (CEO of Zayo) and Bill LaPerch (CEO of AboveNet) are very strong-willed. It would be tough for them to co-exist in the same company. And since the buyer usually wins out, it will probably be Caruso.”
She said she does not foresee much change in management style as a result of the merger. “There are always subtle style changes,” said Jaegers, “but it”™s not like a big bureaucracy is taking over AboveNet. Both are entrepreneurial, lean and mean.”
