The article....
Irvine tech firm branching
out into broadband
Success in DSL could erase investors'
memories of IJNT's troubled roots.
May 7, 2000
By CHRIS KNAP
The Orange County Register
From Los Angeles
The radio advertisements call it "broadband."
Techies call it "fat pipe."
It's an Internet connection so speedy a user can
download the entire Wall Street Journal in 62
seconds -- while simultaneously chatting on the
phone.
Delivered to homes and offices over existing
copper phone lines, these "digital subscriber lines"
are another small revolution in modern
communications.
IJNT.net Inc. of Irvine, Orange County's newest
member of the Nasdaq stock exchange, is touting
itself as a new player in the $100 billion-dollar
broadband market.
Run by a husband and wife team previously
sanctioned in three states for allegedly selling
illegal investments, the company says it will roll
out a Los Angeles-based digital subscriber line
service within the next few months.
IJNT (soon to be called Universal Broadband
Networks) hopes to expand throughout California,
then head east across the U.S.
It's a speculative venture. Like many new
technology companies, IJNT.net has never made a
profit - in fact, it lost $10 million over the past
three quarters.
The fine print on its Securities and Exchange
Commission disclosures says IJNT may not be
able to survive against bigger, better-known and
better-connected telecommunications companies
already offering digital subscriber lines, such as
PacBell, Covad and NorthPoint.
That kind of warning to investors is relatively
common.
Perhaps more troubling are IJNT's roots in a series
of "wireless cable" TV companies that regulators
in three states labeled illegal investment schemes.
In 1993 and 1994 Jon H. Marple and Mary E.
Blake, who today are the chief executive, president
and majority stockholders in IJNT, were accused
by California, Wisconsin and Maine of
using false statements to sell unregistered
investments in wireless cable TV partnerships in
Louisiana, Massachusetts, Pennsylvania and Iowa.
At that time, state and federal regulators were
cracking down on telephone "boiler rooms" that
sold investments in wireless cable.
The name is actually a misnomer: These systems
use microwaves, instead of cable, to beam multiple
channels to a user's rooftop antenna.
But wireless cable faced a lot of challenges, and
many systems were never built.
Regulators said elderly and unsophisticated
investors lost $30 million in such schemes,
In April 1994, investigators for the California
Department of Corporations raided Micro- Lite
Television of Newport Beach, run by Marple and
Blake.
At the time, Marple insisted his operation was
legitimate and predicted he would be exonerated.
He wasn't.
In December 1994, the state Department of
Corporations filed a 15-page complaint in Orange
County Superior Court accusing Marple and Blake
of securities fraud.
According to the complaint, Marple's salesmen
lied about the risk involved and the amount of
capital Marple had lined up from established
bankers. Salesmen allegedly never told investors
that Micro-Lite hadn't yet built a single wireless
system.
Then Marple sold all license rights to the
Louisiana and Massachusetts systems and shifted
investors to the Iowa system without their
knowledge or permission, the documents allege.
Marple and Blake settled the case two weeks later
by signing a consent decree with the state. They
admitted no wrongdoing but agreed to buy back
partnerships from people now invested in the Iowa
partnership. The state barred Marple and Blake
from lying to investors or selling unregistered
securities.
Marple and Blake also signed similar consent
decrees in Wisconsin and Maine.
In a telephone interview from his $1.9 million
home in Palm Desert, Marple, a former attorney for
the Federal Communications Commission, said he
didn't know the people selling the investments in
his partnerships.
"We transferred some licenses to some people in
San Diego, who turned out to be bad people,"
Marple said. "The Department of Corporations tied
us into that. The fact is we'd never met those
people. We just sold them licenses that they
resold."
Marple also asserted that IJNT has no connection
to the wireless cable companies.
Public documents contradict Marple's statements.
The Superior Court complaint alleges that Marrco
Communications Inc. and MCC Venture Group
were the companies selling the unregistered
investments. Marple was the president of Marrco,
and Blake was the CEO. MCC was a wholly
owned subsidiary of Marrco and was run by Blake.
And IJNT's SEC disclosures show the company
acquired the assets of Micro-Lite Television of
Beaumont in 1999.
As for Micro-Lite Television Corp., its name was
changed to Superior Wireless in 1996, then to
JustWebIt.com last year. Shares trade over the
counter for $2.
"There may have been some individuals that didn't
make money," Marple said. "But generally
speaking they did fine."
WIRELESS BROADBAND
The past won't matter to Wall Street investors if
IJNT is successful with its current DSL venture.
As recently as a year ago, IJNT was concentrating
on wireless high-speed Internet connections, based
on new microwave technology.
Company financial disclosures show that the bulk
of the company's revenue over the past two years
came from these wireless Internet connections, as
well as from dial-up Internet access services.
In the past year the company has changed its focus,
zeroing in on digital subscriber line technology.
Such systems can transmit 25 times as much data
per second as the fastest conventional telephone
modems.
"We have always been a broadband company,"
said Marple. "Now we'll also be a state-of-the-art
phone company delivering voice and data."
The potential of broadband communications has
Wall Street investors salivating.
Covad Communications Group, a digital
subscriber line service with 1999 revenue of $76
million, already has a market value of $4.4 billion.
NorthPoint Communications, a DSL firm with 1999
revenue of $23 million, has a market value of $1.9
billion.
Tiny IJNT, just now building its DSL network, had
quarterly sales of less than $1 million and a market
value under $60 million when a few Wall Street
bankers got interested.
Kaufman Bros., a Wall Street investment house that
specializes in emerging communications
companies, said in a Nov. 17 report that IJNT
should be trading at $10 a share instead of its then
$3.
IJNT hit $12 a month later and climbed to $20 in
March. It closed Friday at $7.75, down 12 cents,
which put its total market value at $155 million.
"Typically with these companies on the bulletin
board, 90 percent of them aren't real," said Vik
Grover, a communications analyst for Kaufman.
"This is a real company with several million in
revenues and Nortel as a sponsor.''
(Nortel has advanced IJNT about $44 million in
credit for purchases of its switching equipment.)
Grover conceded that the company is unproven, its
network yet to be rolled out. He also disclosed that
Kaufman hopes to work for IJNT as an investment
banker.
"It's a little premature to be recommending them to
our clients. That's why we don't have a rating on
the stock," Grover said. "But there's something
there to keep your eye on."
PITCHING NASA
IJNT has also converted other doubters.
The company sent Louis DiGregorio, its vice
president of network architecture, to Moffet Field
in Northern California to pitch NASA on its high-
speed Internet access. DiGregorio, an engineer
who helped build Orange County government's
phone system, brought notebooks full of system
maps showing his fiber-optic lines, Cisco routers
and Nortel switches. Now IJNT has a contract to
provide that NASA office with dial-up Internet
access, and will soon add DSL.
In a visit last week to a warren of switching cages
at Wilshire Boulevard and Seventh Street in
downtown Los Angeles, DiGregorio showed off
the company's data transport center, its network
control center and the site of the switches that will
connect it to PacBell's 213, 323 and 310 area
codes.
When the final switches are installed and PacBell
issues UBNetworks its area code and prefixes, the
company will be in the broadband phone business.
"The Street is always waiting and hoping for more
and more provable assurance," said Jerry Pulley,
the company's vice president of marketing.
"We wouldn't have gotten the stock listing and the
following we have if somebody didn't believe we
had something pretty good."
grüße
derm dude
