Networx: Who Knows Who in This Deal? 

And what does the public need to know?

So who is Dan Platko, COO of Memphis Networx? According to his profile at Linkedin.com he's an executive in the telecommunications industry who resides in the greater Denver Area. In other words, he's a long-distance COO. That's fitting in this advanced, work-from-home age of telecommunication. No real problem there.

But guess who else is an executive in the telecommunications industry and also resides in the greater Denver Area? Dan Caruso, a founding member of CII, the holding company intent on buying Memphis Networx for $11.5 million.

Did these men know one another before entering into negotiations over Networx? Was Platko friendly with any of the several Denver-based telecom execs who came together to form CII? Maybe not. And maybe so, and maybe it doesn't matter. But if they did, then serious scrutiny is warranted. Because Memphis Networx doesn't seem to have been run like a business bent on success.

From a marketing perspective, Networx is a disaster. If you ask the average Memphian what Networx does exactly, they can’t tell you. They may be able to tell you, its got "something to do with cable or the internet," but that's about the extent of public knowledge. If Networx' PR strategy was to create the brand presence of a well-kept secret, mission accomplished.

Sources familiar with Networx staffing say it hasn't had a substantial sales force for nearly a year, further limiting brand penetration in the Memphis business community. The company’s website hasn't been updated since 2005. None of these things are good things for a company that wants to build brand awareness or consumer confidence.

In an earlier post I put a great deal of emphasis on the value of Networx' physical assets at a time when Memphis COOs can live in Denver and MLGW is looking to install automated parking meters. But the physical assets only mean so much. Every customer also has a value, and some customers bring value to the city extending far beyond their relationship to Memphis Networx.

Would ServiceMaster have stepped up its presence in Memphis if not for the services offered through Memphis Networx? Maybe, but sources close to the negotiations say that Networx' data center played a big role in the decision making process. Memphis is a logistics/distribution-based economy. Transportation and communication are our bread and cheese. Our economic future will turn on both.

In the face of a proposed $29-million loss, it's critical to remember that public utilities look at building infrastructure that pays off over the long haul -- water pipes that last 100 years, for example. Venture capitalists look for short-term gains. The value ServiceMaster brings to the city won't show up on a pie-graph calculating profits and losses. But it's part of the way a public utility recoups its investment.

Just because two high-rolling telecom execs named Dan -- one the buyer, one the seller -- call the same city home doesn't mean they ski together on the weekends, nor does it necessarily mean a fix was in. But the taxpayers have invested a lot of money in Networx with no taxpayer input whatsoever. Some transparency, some oversight is needed before we rush into a fire sale.

Chris Davis

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