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Hayes Files for Bankruptcy

Modem maker says it will continue to operate and support customers during its reorganization.

By Paul Heltzel, PCWorld   

The company says it will continue to pay employees and support customers, while operating under court protection from creditors.

"We made the decision to seek the protection of the bankruptcy court in the belief that this action would provide the most viable means of achieving our key goals of refocusing our business strategy and operations," said Ron Howard, Hayes vice chair and chief executive officer, in a statement.

Observers noted, however, that this is the second time Hayes has been in Chapter 11 in recent years.

"Hayes is paying the price for struggling at this time last year," said Abner Germanow, an analyst at research firm International Data Corporation. "The modem market has become increasingly competitive. Most [vendors] have consolidated with other vendors, are barely struggling along, or have gone out of business."

During the reorganization, the company says it will also attempt to grow its presence in the voice-over-IP and remote access servers markets. But according to Germanow, that's part of the problem. "They've been trying to do a lot of expansion over the last year, and it's really tough to expand when you're losing market share," he said.

Germanow says the transition to 56-kbps modem technology and the growth of the Internet has made modems an integral part of the PC, not just a component sold to the consumer, which puts vendors like Hayes in a risky position where it is easy to lose market share.