||This article has multiple issues. Please help improve it or discuss these issues on the talk page.
PSINet was one of the first internet service providers (ISPs), based in Northern Virginia, and was involved in the commercialization of the Internet until the company's bankruptcy in 2001 during the dot-com bubble and acquisition by Cogent Communications in 2002.
PSINet was founded in 1989 by Martin L. Schoffstall and by William L. Schrader, who initially funded the company using credit cards and by selling the family car. In May 1991, the company acquired NYSERNet, the corporation that had created the first regional Internet network under Schrader's leadership, an acquisition that gave PSINet commercial access to what would come to be known as the Internet.
The company met with early success, capitalizing on the growing potential of the growing global network, an expansion in which the company played an active role. In 1991, PSINet, UUNET (AlterNet) and General Atomics (CERFnet) co-founded the Commercial Internet eXchange (CIX), a trade association of Internet Service Providers. By 1995, the company had revenues of $32.9 million.
Pressured by increasing competition in the dial-up internet market, the company restructured in 1996 to focus on its commercial Internet business, selling its retail ISP accounts to MindSpring in June of that year, and began its expansion into Europe. Co-founder Schoffstall left the company that year. As a leader in the ISP arena, PSINet was frequently mentioned in trade publications for its accomplishments and reputation, some of it not flattering. For example, Interactive Week, a trade publication that covered the nascent Internet industry, mentioned the reputation of the PSINet sales force as being "Hitler Youth" because of its relatively young and inexperienced sales force and sales management which were very abrupt and inflexible with customers. In 1997, the company raised $1 billion in bond capital and undertook a series of rapid acquisitions, making 76 acquisitions between January 1998 and December 2000. Regional ISPs were a frequent purchase, and according to Congressional testimony by CEO Schrader, the company was by 1999 the largest independent facilities-based ISP in the United States, the second largest ISP in Japan, and had more than 500 points of presence around the world.
In an attempt to generate more brand recognition, in 1999 PSINet committed $100 million dollars for naming rights of the Baltimore Ravens' new stadium in Baltimore, Maryland. Citizens of Baltimore, unfamiliar with the Virginia based company, nicknamed the stadium the "piss bowl" based on the inability to pronounce the company's name, which was on large signage on the stadium's facade. Following PSINet's insolvency, naming rights were renegotiated and the stadium is now called M&T Bank Stadium.
The company's largest acquisition came in March 2000 with the purchase for more than $1.3 billion in stock of Houston-based Metamor Worldwide, a consulting services conglomerate it purchased in an effort to become a "single-source provider" for IT outsourcing services. The company also invested heavily in its fiber-optic network, anticipating strong demand, and planned in early 2000 to invest $1.4 billion over three years to build to expand its services and operations.
Despite its rapid growth and significant position in the commercial Internet services market, the company was never profitable. A management team of inexperienced, young people was replaced[when?] by a more seasoned team of professional managers from companies like MCI, but its acquisition spree was too overwhelming for them to manage, in addition to the executives with a voice based telecom background (circuit-switched) did not completely understand the nuances of a packet switched network. It was a popular stock with analysts during most of the dot-com boom because of its rapid revenue growth and aggressive expansion plans, but by 2000, PSINet was beginning to struggle. The company lost more than $5 billion in 2000 despite having close to doubled annual revenues to $995 million. Some analysts point to the Metamor acquisition as the turning point for the company, burdening it with the demands of integrating business operations while it was already struggling with significant debt from its earlier acquisitions, and facing a general slowdown in the computer services industry. However, the company had missed earnings estimates the year before, and was said to be looking to sell parts of its operation in late 1999.
A wave of senior officers, including the company's president, chief operating officer, and an executive vice president departed the company in early 2001, and Schrader left his CEO job on April 30. In the internal email sent to staff announcing his departure he likened the company's situation to a building in a lightning storm and, referring to his decision to resign as CEO, said "I am that lightning rod". The company's stock price plunged in response to the departures and to wider-than expected losses: the stock, which had traded as high as $60.94 a share in 2000 (after a split), closed at 18 cents in late March 2001.
In May 2001, the company was delisted from NASDAQ because the company's stock had traded below one dollar for 30 consecutive days. The company delayed filing its quarterly 10-Q filing with the U.S. Securities and Exchange Commission. Finally, overwhelmed by debts in excess of $3.7 billion and with dwindling cash reserves, the company announced on June 1, 2001, that it had filed for Chapter 11 bankruptcy protection along with 24 of its US subsidiaries, and that four of its Canadian subsidiaries had filed for protection under Canada's Companies' Creditors Arrangement Act (CCAA).
- "TCP/IP Internetworking Tutorial". PSINet.
- Farmer, Melanie Austria (March 22, 2000). "PSINet buys services firm in bid to be one-stop shop". CNET News.com.
- Kane, Margaret (March 19, 2001). "PSINet plunges on exec change, revamp". CNET News.com.
- Borland, John (April 30, 2001). "PSINet fall mirrors hopes, decline of industry". CNET News.com.
- Miller, Kate (May 14, 2001). "PSINet Founder Runs Out of Luck - Company Operations". Industry Standard, The.
- Luening, Erich (June 1, 2001). "PSINet files for bankruptcy protection". CNET News.com.
- Mark, Ray (April 3, 2002). "Cogent Completes PSINet Acquisition". dc.internet.com.
- Cooper, Paul (August 26, 2004). "Telstra buys PSINet UK". The Register.