Among Los Angeles-based public companies, Infonet Services Corp. has as many names on the Business Journal’s list of the 100 highest paid executive as any other company. And while its stock, at about $8.50 a share as of late last week, remains far below its 2000 peak of $18.63 last July, it has almost doubled over the past six months.
Some of that rebound is likely related to the possible sale of all or a substantial portion of the El Segundo-based computer and data networking services firm. In March, Infonet hired UBS Warburg and Merrill Lynch to find a buyer.
But the rebound also reflects Infonet’s strengthening financial performance and general bullishness on Wall Street.
“They are operating in the sweet spot of telecom services, which is providing data services to multinational corporations,” said Steven Ricks, an analyst with ABN AMRO Securities. “They’ve grown quite sharply in the past few years, and we expect them to continue to grow. They have a very strong balance sheet, and they don’t have the risk of being over-leveraged.”
For the year ended March 31, the company reported net income of $27.2 million (6 cents a share), up from a net loss of $26.7 million (6 cents a share) in 2000.
For the fourth quarter, Infonet reported net income of $8.9 million (2 cents), compared with $5.5 million (1 cent) for the like period a year ago.
The company closed its fiscal year with about $600 million in cash on hand and a client list of 2,600 multinational companies. Its global data network can be accessed in 180 countries.
In an acknowledgement of that strength, Moody’s Investor Service last week upgraded Infonet’s debt rating a notch from Ba3 to Ba2 although it remains listed as “predominantly speculative.”
Infonet was founded in 1970 as a unit of El Segundo-based Computer Sciences Corp., now one of the world’s largest information technology firms.
Through a series of transactions from 1988 through 1992, Computer Sciences spun off Infonet to six telecommunications companies that currently own a controlling stake. Infonet was taken public through an initial public offering in 1999.
As a group, the six telecom companies own two-thirds of Infonet’s shares. Analysts said that Wall Street would have more confidence in the company if it were controlled by a single entity. “They are looking to create shareholder value,” said Ricks.
Infonet executives refused to comment last week.
Six companies five of which are based in the United States reportedly have made bids. Royal Dutch KPN NV is thus far the only member of the controlling consortium that has gone public with its desire to divest its Infonet stake.
