Looming Closure of Pilot Network Shakes Customers
Pilot Network Services Inc., a provider of commercial Internet access and Web site hosting, abruptly suspended operations late Wednesday, sending more than 200 companies scrambling to keep their Internet operations alive.
Pilot, based in Alameda, laid off its remaining 180 employees and said in a statement Thursday that the company is reviewing its options but “does not expect to be able to resume operations in its current condition.”
The impending closure of Pilot’s network affects a wide range of companies nationwide, including GE Capital, Gap, PeopleSoft, Rand think tank, Newsweek magazine, the Los Angeles Times, Providian Financial, Baxter Healthcare and others.
The companies face the possibility of losing their Internet connections and Web pages, along with huge amounts of data and archived corporate records.
Pilot’s demise is the latest in a series of recent failures by Internet service providers that have left customers fuming. Earlier this month, high-speed provider NorthPoint Communications shuttered its network with little warning, disconnecting more than 100,000 users.
Several of Pilot’s customers have chipped in to keep a handful of former Pilot employees on the job so the network remains in operation while customers switch to new Internet providers. Many Pilot customers have sent their own people to retrieve information and valuable Internet equipment housed by Pilot.
Christopher Ambarian, an executive at Stealth CFO in Redondo Beach, went to Pilot’s El Segundo office Thursday to cart out heavy computer equipment that stores his company’s online market research data. He was greeted by a single former Pilot employee, who was helping customers pack up their gear.
Pilot specialized in providing corporate Internet connections with enhanced protection against electronic attacks. The company also provided a protected home for corporate Web sites and electronic-commerce services.
Trading in the company’s stock was halted on Nasdaq, but last traded at 21 cents Thursday, down from a 52-week high of $19.13 last July. Last month, Nasdaq moved to delist the stock, citing Pilot’s deteriorating financial condition.
The company had been suffering through heavy losses even as its revenue climbed. Pilot reported a net loss of $11.2 million on revenue of $9.7 million for the quarter ended Dec. 31. In February, Pilot announced a key deal with AT&T; that was supposed to save the company with a fresh infusion of cash, but that deal ultimately fell apart.
No other funding emerged, leaving Pilot to shop desperately for a buyer. At one point, a team of employees hoped to salvage the firm, but that too unraveled.
For many, the woes at Pilot seem hauntingly familiar, as a string of ISPs and other tech firms go bust.
Pilot is the third Internet company to go under while working with the city of San Carlos in the past 90 days, said Assistant City Manager Brian Moura. The other two were hired by the city to redesign its Web site and make more city paperwork available over the Net.
“Watching it, it’s clear--there’s a real, live shakeout going on,” Moura said. “As we look at contractors, obviously we’re paying more attention to how big they are and who their parent company is than we did in the past.”
