EarthLink plans drastic cuts in staff
Internet service provider EarthLink Inc. said Tuesday that it would cut 900 jobs -- or nearly half its workforce -- and close four offices in an effort to reduce operating costs.
The company, founded 13 years ago in Los Angeles’ Los Feliz neighborhood by entrepreneur Sky Dayton, saw its shares climb 7% on the news.
EarthLink continues struggling to generate revenue as dial-up access customers turn to high-speed alternatives from cable and phone companies.
More cuts could be announced before year-end, said Rolla P. Huff, the Atlanta-based company’s chief executive. As part of the plan, EarthLink also said it would repurchase $200 million of its stock.
“While we see this as an important first step in unlocking the underlying value that we believe is in our company, we are only eight weeks into the process of repositioning EarthLink for the future,” Huff said. “These changes get our cost structure in line, but there is much more to do.”
Like many other Internet service providers with roots in dial-up access, EarthLink has sought to diversify its revenue base. The company resells some high-speed services, but phone companies in particular have been able to offer cut-rate prices, particularly as part of bundles with traditional long-distance and local calling plans.
The company had counted on selling access to citywide wireless networks in exchange for helping cities build the networks. But amid questions about customer demand and the technology’s performance, EarthLink announced in April that it was reviewing new deployments while evaluating the performance of the current rollouts in four cities, including Anaheim.
It also faced questions over disappointing results from its Helio project, a wireless joint venture with SK Telecom of South Korea. Each company has made a commitment to invest $220 million in Helio and EarthLink has said it could spend an additional $50 million on the project, which was blamed for quarterly losses.
In July, EarthLink cut its fiscal year 2007 revenue estimate after reporting hefty losses related to Helio.
The company said Tuesday that it would close offices in Orlando, Fla.; Knoxville, Tenn.; Harrisburg, Pa.; and San Francisco. It also said it would “substantially reduce its presence” in Atlanta and Pasadena, its previous headquarters.
EarthLink said it expected to save $25 million to $35 million through the rest of the year because of the restructuring. The company employs about 1,900 people.
Its shares rose 48 cents to $7.34 on Tuesday.
