Comdisco Retains Banks To Explore Its Options

After a failed IPO for its subsidiary, Comdisco Inc. has engaged investment banks to explore strategic alternatives, including a sale, for the unit. Analysts believe that the company could have an easy time finding a buyer. Comdisco, headquartered in Rosefield, Ill., is a $3.7 billion provider of information technology and other services, including data protection and network, financial, and technology management services. The company also provides equipment leasing, financing, and other services to venture capital-backed start-up companies. Through its Prism Communication Services unit, Comdisco provides high-speed, digital network services. Comdisco acquired Prism last March, and the unit has been posting operating losses since its inception. Analyst Thomas Kmiotek of Fitch IBCA Inc. said that losses were expected from the company when it first acquired Prism to expand its DSL service in North America. Unfortunately, the losses the company mounted for its third quarter because of the Prism acquisition were greater than anticipated. Kmiotek added that after the failed IPO, serious doubts were raised about Comdisco’s “capacity to fund the growth of Prism through internal operations, while rapidly growing their venture capital businesses.” Nonetheless, he believed that Prism’s telephone switching assets, which is essentially computer equipment, would be attractive to DSL providers. He added that “no one is better” when it comes to re-marketing (selling and then re-leasing assets) computer equipment than Comdisco. Analyst Joy Mukherjee of A.G. Edwards said, “As far as fixed assets are concerned, the division is an attractive proposition for a big telephone company or local exchange carrier.” Mukherjee said that Comdisco paid between $450 million and $500 million for Prism, and it could probably fetch around 10 times revenues in a sale, which translates to about $900 million to $1 billion. Mukherjee declined to be more specific with regard to possible buyers for the unit. In a conference call, Comdisco Chairman Nicholas Pontikes said, We have engaged investment bankers to look at all alternatives for us and for Prism. We are looking at everything right now.” For its third quarter ended June 30, the company posted revenue of $17 million on revenue of $953 million compared with a year-earlier gain of $36 million on revenue of $1.3 billion, of which $503 million came from the sale of non-strategic businesses. Comdisco did not return calls seeking comment.