Is the ASP Glass Half Empty or Half Full?

Would you like to start the year with good news or with bad news?

What if I said there's both? How does that make you feel? Are you fearful that the half-empty glass of online service providers will soon be drained or are you buoyed by a rising tide that has already carried its participants halfway to the brim?

What's in Store for 2002?

Which is the true harbinger of things to come in 2002? Xevo's major VC win or USi bankruptcy? Give us your feedback at the ASPnews Discussion Forum

Dawn had barely broken on the first day of the first full working week of the new year, when two starkly contrasting news stories arrived on our desks, each landing with a reverberating thud.

First, Xevo Lands $20 Million in Financing, a heartwarming story to get the year off to a positive start. Xevo is a true pioneer and the leading ASP infrastructure pureplay, so if it can score as much as $20 million in the current climate, that appears to be a sure sign the industry has started to put its woes behind it.

Then, USi Files Bankruptcy, Sells Equity. Uh-oh. Not so long ago, pioneering pureplay provider USinternetworking was the undisputed leader of the emerging ASP industry. Its bankruptcy seems a sure sign of more pain to come in the continuing slide from hype to despair among ASPs.

So which is it going to be? Will 2002 be the year when online service providers bounce back in a second wave, or will it be a period of terminal decline for a discredited fad? Which of these stories is the true harbinger of what 2002 will bring?

USi Looks Beyond Bankruptcy
USi's fall from pre-eminence is not doing the industry any favors. By far the best known of ASPs, its bankruptcy sends the wrong kind of message to potential customers of online service providers. As the first ASP to complete a NASDAQ IPO, its failure has also burnt many small investors who were swept up in the early hype surrounding ASPs. Those still holding USi stock have lost every penny of their investment. They may as well frame the certificates now; lacking the notoriety of bigger bankruptcies such as WebVan or Enron, there's little chance they'd attract buyers even in an eBay auction of dot-com mementoes.

Yet looking beyond the attention-grabbing headlines, it's important to note that USi's management and staff are still working hard in what must be very difficult circumstances to maintain services to their customers. One of the great unreported stories of the ASP industry over the past year has been the enormous energy expended at failing ASPs to minimize disruption to clients. Very few have closed down without first helping their customers transfer to alternative providers, even if continuing to trade has meant using up the last dregs of equity value left in the business. Unfortunately it has been the ones that have closed without warning that have hit the headlines, while the quiet handovers have neither sought nor gained publicity.

USi had hoped to stave off bankruptcy, but was unable to get enough of its creditors to agree to the rescue package it had originally hoped to secure with the help of Bain Capital last October (see New Life for USi. Now Bain is to acquire the bankrupt company's assets so that the business can continue serving its customers in a new guise — probably merged with Interpath, Bain's other ASP property.

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