The Upshot: Van Overboard? A Lot of Pain at Covad

During the tech boom, one popular measure of a company's health involved counting cars in the parking lot on the weekend. Now, amid the tech bust, you can find yourself counting custom-painted service vans in a used-car lot.

Take a ride on Long Island's Sunrise Highway and you're apt to spot three black vans with the distinctive teal Covad (COVD Quote) logo splashed across their sides, roof to running board, parked on the Bast Chevrolet lot in Seaford, N.Y.

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The vans have been on the lot for two weeks, in a sort of limbo. The financially strapped telco has been slashing jobs, pulling back on network expansion and cutting overhead to stay afloat. A Covad spokeswoman says the vans are part of a leased service fleet being handed back to owner GE Capital; meanwhile, Bast Chevrolet says it expects Covad to pick up the vans within three weeks or it will slap "storage fees" on the company. GE Capital didn't return calls seeking comment.

Regardless of who ends up with the colorful vans, Covad is the nation's largest independent digital subscriber line wholesaler. DSL gear uses conventional copper phone lines to provide high-speed Net connections. Technicians with the Santa Clara, Calif.-based company use the vans for new line installation jobs.

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But after two years of battling the Baby Bells in court and in the field, Covad and its fellow DSL start-ups, NorthPoint (NPNTQ Quote) and Rhythms NetConnections (RTHM Quote), look like they're getting ready to throw in the towel. NorthPoint is in bankruptcy protection, while Covad and Rhythms are trading for less than $2 a share.

The fate of the vans highlights the rising pressures on Covad. And those pressures keep intensifying.

Covad's unraveling took a dramatic turn Tuesday when the company boosted a planned restructuring charge to a range of $50 million to $100 million, from $20 million, to cover the costs of layoffs and facility closings. The company also delayed its quarterly earnings report, pending a financial review that suggests that Covad's 2000 revenue could be about $52 million less than anticipated, with losses about $17 million wider than expected.

Meanwhile, the Bells, owners of the local phone lines, carry on with delivery of DSL at a glacial pace, now even less fazed by competition or regulation, say observers.

And speaking of parking lots and performance, there are reports of empty lots on the weekends at Bell Labs, the granddaddy of all telecom innovation. One intrepid New York analyst who lives in New Jersey and enjoys running on the company's vast open campus says there were few signs of life and no cars in the lots last weekend at Lucent's (LU Quote) optical networking headquarters in Holmdel, N.J.

Of course, these findings are highly unscientific, and no one would suggest there is any correlation between the empty lots at Lucent's optical division and the woeful condition of its share price. But you can be sure we'll be on the lookout for Lucent service vans at area car lots.