Kurt Van Wagenen tells Michelle Rivera this company went from bankruptcy in 2002 to recently finishing its best year in history.

Just a mere five years ago, Neon Communications was forced into bankruptcy, but in 2007, the telecommunications company is a financially stable company, just finishing one of its best year since its inception in 1998.

After Westborough, Mass.-based Neon was formed, it went through a build-out stage, incurring a lot of debt in the process and eventually declaring bankruptcy in 2002. In 2005, Neon merged with Globix Corporation. Last year, Globix sold off many of its businesses to pay down its debt and improve its financial
performance.

The company sold its US and UK divisions as well as a building in NYC, using the proceeds to pay off substantially all of its debt and keep some money in the bank so it could be self-funded going forward. The most recent transition took about nine months, starting in March of 2006 and closing at the end of October. “Basically, the position that this put us in is that we’re now a standalone, public, debt-free company that is focused on our core business,” said Van Wagenen.

Kurt Van Wagenen

“We’ve always been challenged by our balance sheet, which in the most recent past, had more than $100 million in debt on it. We haven’t been in a great position to fund some of the growth opportunities we’ve seen in the marketplace. We’re now in a position where we can take advantage of great opportunities ahead.”

Staying the course
To get the company out of troubled water, Van Wagenen and his team focused on three initiatives, one of which was cost cutting to make sure the company’s costs were more in line with its revenue. The second step was to implement a disciplined financial review process going forward for expenditures. The process ensured the company was spending its money on initiatives that generated a return on the investment in a relatively short period of time to fund its growth.

Step three was making sure the company was focused on its core business. “Some of our peers decided to expand on a nationwide basis and to expand into other areas of business or product lines,” Van Wagenen said. “We stayed focused on our region, the Northeast and Mid-Atlantic areas. We stayed almost exclusively focused on servicing our carrier customers and some of the carrier-like enterprise opportunities we saw in the marketplace.”

Big changes meant a big shift in employee morale, which Van Wagenen admits has been the biggest challenge for him and his management team as they were forced to go from bankruptcy to cost cutting to downsizing. “We went through a period of time when the future of the business was uncertain, which can be unsettling for employees, particularly when working for a smaller company like ours,” said the chief executive. “The most important thing we did as a management team was work to instill and reinforce, within the employee base, the positive results we were experiencing.”

No distractions
Staying true to its product offering has given the company the ability to stay focused on developing the types of products and services customers demand, without distraction. “Customers come to us for services because we have a unique network. We focus largely on the underserved tier two and tier three markets,” Van Wagenen said.

The chief executive realizes that Neon isn’t the biggest player in the market, so it doesn’t win business based on its brand name or size. “We win because we do what we say we’re going to do, on budget and on time. That’s what our big, blue chip customers demand. When we deliver, they come back to us and order more services.”

Neon has seen consistent growth over the past two years—about 20% annually. An area where the company has seen growth over the last few years is within its wireless customer base as well as high bandwidth services. As the company looks ahead, the chief executive plans to expand into the Long Island, New York market and the Philadelphia region. “We’re also in the processof enhancing our Ethernet service offering. Our customers have demanded more capabilities, and it’s an attractive area of growth for us as we push forward,” Van Wagenen concluded.