YLine

» see yline.com as it lived, on the wayback machine

~ the eulogy ~

A Vienna company with 34 million euros of annual revenue listed on EASDAQ in 1999 and became Austria's house symbol of the new economy. Lehman Brothers published a price target of 400 euros on it. The share topped out at 278 in March 2000. What YLine actually sold was much plainer than any of that: an IBM personal computer that arrived with an internet connection attached, billed by the minute of use. Between June 1999 and March 2000 more than thirty thousand people in Austria signed up.

Werner Böhm ran it, and the way the company grew was by swallowing small firms that various people contributed as payment in kind, settled in YLine stock at prices nobody has since been able to justify. In March 2000 it paid 1.5 million euros for a pornography site whose seller had bought the thing a month earlier for 174,000. The same month YLine made the Republic of Austria an offer of two billion schillings, payable in its own shares, for Telekom Austria's internet division. Part of how it got that far was the closeness of people around the company to the FPÖ. Böhm has said he was offered the infrastructure ministry in 2000.

The arithmetic underneath was simple and bad. In 2000 YLine bought thirty thousand computers from IBM, around 30 million euros of hardware, in a deal arranged by an IBM employee who was also a founding shareholder. Those machines went out to households on the pay-per-minute terms, so the money came back in small monthly pieces while the invoice from IBM did not wait for them. Losses for 2000 came in at 37.7 million euros against 34.1 million of revenue, three times the previous year's figure.

Metered internet was not an exotic product where I was sitting. In Turkey it was simply what a phone line did: you dialed, and the cost was the call. So the strange part of YLine was never the billing, it was that somebody had wrapped a computer around the meter and sold the bundle to a stock exchange as growth.

~ the dossier ~

~ the seventeenth of September ~

IBM ended the cooperation in August 2001. Late in the month the two sides agreed that YLine would forward every incoming payment straight through to IBM against open claims, which is what you sign when the partnership is already finished. Publication of the second-quarter balance sheet was pushed back to 17 September. On 17 September nothing was published, the Vienna exchange suspended trading in the share, and the price fell 48 percent to 46 cents. Lehman Brothers had still been telling people to buy it in June.

Eight days later, on 25 September 2001, on the advice of a restructuring specialist brought in to look at the books, YLine filed for insolvency. It had 230 employees. The opening statement put liabilities at 20.2 million euros, of which 13.6 million was owed to IBM, against 46.1 million of assets that were mostly tied up in subsidiaries. The one piece worth real money had already gone: that summer YLine sold its provider business and its thirty-thousand-plus customers to Telekom Austria, which kept both the customers and the yline.com domain running until 2020.

~ fourteen years of court ~

In September 2002 the administrator sent the Vienna prosecutor what he had found. Revenues, he wrote, had been generated artificially with no matching cash flow, and the purpose of the company had been to use the capital market to fund its running costs rather than to earn money. His clearest example was a marketing idea called Ares, licensed in 2000 to YLine's German subsidiary Proofit M-Commerce AG for 1.8 million euros, days after YLine had put exactly 1.8 million euros into that subsidiary as a shareholder contribution. Ernst & Young had criticized the purchase internally in May 2001 and was later criticized itself over the valuations it signed.

The indictment was finished in December 2012. The trial opened in April 2014 against twelve former managers and supervisory board members plus the Ernst & Young auditor, on charges running from breach of trust to insider dealing. On 17 December 2015 Böhm accepted the court's offer of a diversion for 7,000 euros and the balance-sheet case against him was dropped. Nobody was convicted, and the judge's reasoning was that management's errors fell inside normal business conducted under entrepreneurial risk.

~ what was left ~

The administrator also sued the FPÖ for 436,000 euros, for YLine services the party had taken between January and September 2001 without paying. It settled in 2007 for 580,000. Proceedings closed in 2011 with creditors recovering 35.2 percent, unusually high for a dot-com estate, mostly out of clawed-back payments and the liability of the people who had contributed those overvalued companies. Today yline.at serves a blue page with one logo on it, for something called Austrogate.

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