EarthLink announces restructuring; 900 to lose jobs, offices to close

29 Aug 2007

US broadband provider EarthLink has announced it is restructuring and laying off 900 of its staff – about half its workforce – after conceding its efforts to remould itself as an integrated service provider offering high speed internet access over multiple technologies has back-fired. The company has seen revenues falling from its core internet business and has failed to staunch the flow despite efforts to diversify its business. As part of the rationalisation EarthLink will shut down four offices and scale back its activities in two other locations, it said. The changes will begin immediately. ‘These changes get our cost structure in line, but there is much more to do,’ said EarthLink CEO Rolla P. Huff, who took over the company on 25 June.

EarthLink’s bottom line has been undermined by the rapid proliferation of inexpensive high speed web access alternatives in the US in recent years, which have eaten into its core business. To offset this, the company looked to diversify into other areas, including the launch of a major effort to build municipal wireless networks and a joint venture initiative with South Korean cellco SK Telecom to create an alternative mobile device and service provider, called Helio. However, both ventures have failed to excite, and neither has reached break-even. EarthLink has now restated its revenue and loss projections for 2007. In the third quarter, it expects to lose between USD33 million and USD43 million on revenue of USD290 million to USD300 million. For the full year, the company expects to record revenues of around USD1.2 billion and lose between USD79 million and USD109 million.

The future of EarthLink’s Wi-Fi municipal wireless networks in major cities such as Anaheim and Philadelphia are unclear, although local industry watchers believe that EarthLink will seek a buyer for its Wi-Fi business, with Sprint Nextel and Clearwire seen as the frontrunners.

United States, EarthLink