Cogent Slumps After Megaupload.com Is Shut: Washington Mover - Businessweek

By Alexander Yablon

Jan. 20 (Bloomberg) -- Cogent Communications Group Inc., the Washington-based Internet-service provider, fell the most in more than three years after customer Megaupload.com was shut by U.S. authorities during a copyright-infringement investigation.

Cogent dropped 17 percent to $15.55 at 12:36 p.m. New York time after declining as much as 23 percent for the biggest intraday plunge since October 2008.

The company provided Megaupload with leased computers, Internet bandwidth, hosting, and support services, according to an indictment of the Hong Kong-based file-sharing site. Megaupload transferred $30 million to a Cogent bank account from February 2009 to last July, according to the indictment.

The FBI searched Cogent’s headquarters, according to a note by David Dixon, an analyst at FBR Capital Markets, who cited a Wall Street Journal report and talks with Cogent. The company may lose revenue and the same might be true for Cogent competitors such as Level 3 Communications Inc. and its Global Crossing unit, according to the analyst.

“It remains unclear how many other similar file sharing sites may be at risk and the additional bandwidth related revenue exposure for companies such as Cogent, Level 3 and Global Crossing,” Dixon wrote in the note today.

Travis Wachter, Cogent’s marketing communications manager, didn’t immediately respond to calls and an e-mail seeking comment.

Josh Howell, a spokesman for Broomfield, Colorado-based Level 3, also didn’t respond immediately to a call. Level 3 acquired Global Crossing in October.

--Editors: Jeffrey Tannenbaum, Niamh Ring

Cogent Slumps After Megaupload.com Is Shut: Washington Mover - Businessweek