Good money chasing bad money?

Today’s Austin Business Journal reports:

At yesterday’s city council meeting, the council approved a $317,500 proposal to pay a Virginia outfit called GTSI Corp. (Nasdaq: GTSI) to do a technical trial to design, build, and operate a system to provide broadband Internet service over the city’s power grid.

What concerns me is the company GTSI. Did the council see this Washington Post article entitled “GTSI’s Struggles Lead Ernst & Young to Doubt Firm’s Ability to Survive“?

The article states:

In financial results for 2005 that had been delayed, the company also disclosed that its independent accounting firm, Ernst & Young LLP, had informed executives that there was “substantial doubt” that GTSI could continue as a going concern. GTSI had $22,000 in cash at the end of 2005, down from $397,000 last year.

On the plus side, the Post article indicates GTSI recently received a $125 million revolving credit line. Although, usually these lines of credits have enough convenants and provisions where if something slips, the line of credit dries up.

And it sounds like this company was until recently a computer reseller without a long track record in deploying broadband over power lines (BPL). I don’t know the technical challenges involved, but I am assuming there are some significant hurdles. With GTCI employees jumping ship, are the best engineers still around. It’s doubtful.

BPL is sort of the Sasquatch of broadband. We’ve heard about it for years, but has anyone actually seen it? By going with GTCI, will Austin see anything out of this $327,000 investment?

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