Genuity Fizzles, but Who Cares?

Question: What do Genuity's disappointing first-quarter results and confusing marketing messages mean to the company's future?

Answer: Nothing.

The company once known as GTE Internetworking essentially is in a holding pattern, waiting for the day that Verizon Communications can bring it back into the fold. Verizon was forced to spin off GTE Internetworking last year as a condition imposed by the Federal Communications Commission for the approval of the merger between Bell Atlantic and GTE that created Verizon. Verizon can reacquire Genuity once it wins approval to offer in-region long-distance service to 95% of the access lines served by the former Bell Atlantic.

Until that happens, Verizon appears content to keep loaning Genuity money to keep it going. On May 3, Genuity got another $400 million financing commitment from Verizon, bringing its total financing from that company to $900 million. Verizon also has agreed to supply Genuity with up to $2 billion in credit, with the loan coming due in five years.

Presumably by that time, Verizon will have the go-ahead to bring Genuity back into its fold. Verizon has an option to convert its current 9.5% interest in Genuity into an 80% stake once it meets the FCC's conditions.

The Verizon connection is keeping Genuity from taking a sharper hit in the financial markets for its Black Rocket network services platform initiative. The Black Rocket platform continues to be a source of confusion for some market watchers.

"No one gets Black Rocket," says Lisa Perri, industry analyst at Aberdeen Group.

"Genuity never successfully transferred themselves from an Internet player to a slick marketing machine and they are taking a stab at it with Black Rocket, but it's like taking three steps backward instead of putting it forward," adds Amy Levy, industry analyst at Summit Research.

Genuity disagrees adamantly with these assessments, saying Black Rocket "is clicking" and people are getting its message.

Copyright © 2004 Ziff Davis Media Inc. All Rights Reserved. Originally appearing in The Net Economy.