New CAIS CEO Cleans House

Michael Lee has been making changes—big changes, since he took the helm of struggling Washington, D.C.-based CAIS Internet Inc.

by Thor Olavsrud of internetnews.com [May 4, 2001]

Lee stepped in as president and chief executive officer of CAIS on March 17 after serving as chief business development officer at TelePacific Communications, a Los Angeles-based next generation integrated communications provider of converged voice and data services.

In April, Lee told analysts and investors that the company would radically change its business plan by cutting dead weight residential and hospitality services. CAIS had gone after the residential market by capturing multi-family units like apartments and condominiums. But during the April conference call, officials conceded that CAIS had seen only meager return on investment and that "substantially all" multi-family services would be discontinued. And hotels, once the cornerstone of CAIS' business, simply weren't able to interest customers to use the bandwidth available.

Inhospitable territory
Essentially, though the company had built a state-of-the-art network with OC-3 and OC-12 lines crossing the country, it was having trouble lighting up the network with data.

Hospitality won't disappear, but it will get some major surgery, according to Peter Benedict, CAIS' new director of Marketing.

The company will forego its vision of broadband connectivity in every hotel room for a more focused approach zeroing in on profitable services like meeting rooms equipped with T-1s, Internet kiosks in hotel lobbies and automated business centers.

Broadband bid
But Lee plans more widespread changes as well. He wants to take the company into the more lucrative business arena, providing bundled broadband connectivity to businesses around the country.

"This company, almost as a by-product of the hospitality business, became a tier-one ISP," Benedict said, adding that CAIS has the infrastructure to compete with players like Broadwing and UUNET.

With time running out for CAIS to make the necessary changes to survive, Lee Thursday moved aggressively to create a senior management team with the experience to take the company in the direction he has plotted. So it's out with the old and in with the new; Lee brought in executive talent with deep experience in the data services and telecom businesses with the hope they can give CAIS what it needs to reinvent itself as a tier-one nationwide provider of broadband access and bundled value-added data services to businesses nationwide.

Lee himself has impressive credentials, with more than 12 years in the telecommunications and Internet industries. Before he joined TelePacific, he founded Los Angeles-based ISP DigitalVelocity, which merged with TelePacific in 1999. Lee was also a principal at CERFnet, one of the original ISPs in 1994. CERFnet was later acquired by TCG which in turn was acquired by AT&T.

Wholesale changes
As for his team, Lee retained Executive Vice President and Chief Financial Officer Andrew Hines—formerly chief operating officer and CFO—who has been with the company since October 2000 and has experience as a senior executive in both Fortune 100 and entrepreneurial companies. He also kept Steve Roberts, who has moved from a position as senior vice president and general manager to a new role as senior vice president, Internet Sales.

But the rest of the faces are new:

• Mike Abbot, the new chief technology officer, comes to CAIS from a position as director of ISM security and e-business at INTELSAT, the world's largest commercial satellite service provider. He served as both senior technical officer and senior systems engineering architect at INTELSAT. He has 22 years of experience in the industry, and in that time has built, managed and administered multi-system Wide Area Networks, software development projects and software life cycles.
• Amit Rikhy is the new senior vice president of Strategic Planning. Like Lee himself, he comes from TelePacific Communications, where he was acting CFO and vice president of Corporate Development. He brings with him 14 years of domestic and international experience in corporate finance, strategy, mergers and acquisitions and business development.
• Michael Martinez has taken over as senior vice president of Hospitality Sales, which appears to have become the company's unwanted stepchild. Martinez, too, is a veteran of TelePacific Communications, where he was vice president of Alternate Channels, responsible for all channel activities including strategic partnerships, hospitality services, multi-dwelling units, agents, alternate channel sales and processes, business plans, marketing strategies and operations relationships. He has 12 years of experience in the computer and telecommunications industries.
• Benedict, the new senior vice president of Marketing, rounds out the new senior management team. Benedict, most recently director of Product Marketing at Tachion Networks, has experience in developing and executing comprehensive public relations and marketing programs with both established and startup companies. He has launched and promoted an array of service provider data solutions including IP telephony, multi-service access, ATM/frame relay, Internet access management, VAN policy management and dial/broadband remote access services.

Lee said, upon announcing his new management team, that the backbone provider already has the fundamental components to be one of the largest and best performing ISPs in the nation by virtue of its national broadband network and product offerings.

"The leadership and experience of this new management team will help the company optimize its sales, network, product offerings and operations along the data services business model," Lee said. With this new team we are in a position to make a major impact in the ISP market and dramatically grow our customer base and revenues."

But the changes must likely come quickly, and they need to show results. Since September 2000, the company has slashed its staff from a high of 801 to less than half that number. It has also written IOUs to vendors, promising that its principal payments would be met in 2002 and 2003. And, as of late December 2000, the company had a cash balance of only $68.6 million. It has not updated that figure since, but in April it said it would need additional capital in the form of investment or debt financing by late second quarter 2001.

—End