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Global Crossing Shares Fall 16% on Concerns Over Contractor Lawsuit

Telecom firm says Tyco has been replaced, and South America project will be completed as planned.

May 24, 2000|Elizabeth Douglass

Global Crossing Ltd. shares plunged nearly 16% Tuesday as investors worried that the telecom firm's $1-billion lawsuit against a key contractor could cause delays and hamper future revenue.

Bermuda-based Global Crossing, a worldwide communications network provider with executive offices in Beverly Hills, saw its shares fall $4.39 to $23.63 on Nasdaq, lowest since September.

The stock (ticker symbol: GBLX) has lost more than 60% of its value since February, when the price hit a 52-week high of $61.81.

Tuesday's drop stemmed mostly from news that Global Crossing had filed a federal lawsuit late Monday accusing longtime contractor Tyco Submarine Services of stealing trade secrets and using the information to create a rival business and a competing network project in South America.

Tyco International, which owns Tyco Submarine, said Tuesday that the suit is without merit and characterized the move "as the latest attempt by Global Crossing to avoid payment of balances due" to Tyco for work on Global Crossing's South American network. Tyco shares (TYC) fell $2 to $42.

Global Crossing officials said it has replaced Tyco as a contractor on that project, and that the network will be completed on schedule and within budget. But many investors clearly are nervous, with no bottom-line earnings in sight for the company as it continues to build out its telecom network.

Also on Tuesday, Global Crossing's Asia Global Crossing joint venture filed preliminary paperwork for an initial public stock offering.

Asia Global Crossing, a venture between Global Crossing, Microsoft Corp. and Softbank, is building an 11,000-mile undersea fiber-optic network to serve Asian nations.

The IPO filing, which has been expected, did not disclose how much Asia Global Crossing hopes to raise, but the filing fee was based on an estimate of a $100-million IPO.

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Global Woes

Global Crossing's shares have tumbled with the tech sector overall since February. Monthly closes and latest on Nasdaq: Tuesday: $23.63, down $4.39

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Source: Bloomberg News

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