Omnisky Declares Bankruptcy, Sells Out to EarthLink
EarthLink, the U.S.'s second largest ISP, has agreed to buy just about all of OmniSky’s assets, including its subscriber base. As part of the transaction, OmniSky and EarthLink intend to transition OmniSky’s 32 thousand subscribers to EarthLink with the intention of continuing uninterrupted wireless service. As part of the deal, OmniSky, a wireless ISP, is declaring bankruptcy. This means the sale requires the approval of a bankruptcy court and a bankruptcy court-supervised overbidding process, where bidders with higher and better offers may emerge. Financial details of the deal with EarthLink were not given.
The Chapter 11 filing allows OmniSky to maintain its operations and continue to provide wireless service to its subscribers during the sale approval and transition process.
“This filing is intended to protect and maximize the value of our business for the benefit of all of our stakeholders and to preserve uninterrupted service for our subscribers until they can be transitioned to EarthLink,” said Patrick McVeigh, OmniSky’s Chairman and Chief Executive Officer.
While the bankruptcy court reviews the proposed sale to EarthLink and other offers that may emerge, OmniSky believes that it has sufficient cash on hand to finance its operations, including supporting the company’s post-petition trade and employee obligations, as well as its ongoing operating needs during the process.
The company has been struggling for a while. Last month, it failed to release a financial report for its most recent quarter, a violation of SEC rules. It has since been delisted from the Nasdaq.
In an interview with CBS.MarketWatch.com, Lance Weatherby, an executive VP of EarthLink Everywhere, said, "The primary reason we're doing this deal is because we like the product that it's created: great client-side software and nice user interface."
"OmniSky didn't take off because it cost $40 per month to get data services on a hand-held device. People want to pay $20 per month," said Mr. Weatherby, implying that the company intends to lower the subscription price.
Earlier this week, Yada Yada, an OmniSky rival, permanently stopped service.
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