EarthLink To Cut 900 Jobs
Shares of EarthLink Inc. climbed more than 6 percent Tuesday after the Internet
service provider said it would cut 900 jobs -- or about half its work force
-- and close four offices in an effort to reduce operating costs.
The company also said it will repurchase $200 million of its stock as part
of the plan, said Rolla P. Huff, the Atlanta-based company's president and chief
executive. More cuts could be announced before the year's end, he said.
"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," he said. "These changes
get our cost structure in line, but there is much more to do."
The company will close offices in Orlando, Fla., Knoxville, Tenn., Harrisburg,
Penn. and San Francisco. EarthLink also said it will "substantially reduce
its presence" in Atlanta and Pasadena, Calif.
EarthLink said it expects to save from $25 million to $35 million through the
rest of the year because of the restructuring. The company currently employs
about 1,900 people.
Shares rose 44 cents, or 6.4 percent, to $7.30 in afternoon trading.
The company also lowered its 2007 revenue outlook for the third time this year.
EarthLink said it now expects sales of $1.19 billion to $1.21 billion -- down
from its previous forecast of $1.23 billion to $1.24 billion. The company said
it expects a full-year loss of $79 million to $109 million, excluding restructuring
EarthLink also offered a warning for 2008, saying it expects subscriber additions
The company is struggling to attract dial-up customers who were turning to
high-speed alternatives and had announced it was studying the performance of
its municipal wireless Internet networks in four cities before deciding how
to move forward with similar networks elsewhere.
It also faced questions over disappointing results from its Helio project,
a wireless joint venture with SK Telecom of South Korea. The company has already
committed to invest $220 million in Helio and has said it could spend another
$50 million on the project, which was blamed for quarterly losses.
In July, the company cut its fiscal year 2007 revenue estimate after reporting
hefty losses related to the Helio project.
The struggles were evident in the company's earnings. EarthLink posted a $16.3
million loss last quarter.
Huff, who was appointed in June, is known by analysts for his willingness to
cut loose unprofitable projects. He told reporters after he was named the company's
leader that he would conduct a two-month review of the company's businesses
aimed at "getting a very focused strategy."