On Tuesday EarthLink said it was cutting 900 jobs, roughly half of its workforce, in an effort to save between $25 million and $35 million this year.
EarthLink said it will close offices in Orlando, Fla.; Knoxville, Tenn.; Harrisburg, Pa.; and San Francisco. The company also said it would “substantially reduce its presence” in the Atlanta and Pasadena, Calif. offices.
EarthLink expects to record facility exit and restructuring costs of $60 million to $70 million associated with the plan, including $30 million to $35 million for certain employee-related costs, and $10 million to $15 million for lease termination costs.
EarthLink expects that these facility exit and restructuring costs will be recognized primarily in the third and fourth quarters of fiscal year 2007.
“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. These changes get our cost structure in line, but there is much more to do,” said Rolla P. Huff, EarthLink’s president and CEO, in a prepared statement. “We expect to announce additional steps as we continue our work over the coming weeks and months.”
EarthLink also modified its previously issued revenue, adjusted EBITDA and net loss guidance for the third quarter and full year 2007. For the third quarter of this year, EarthLink now projects revenue of $290 to $300 million.
The company said it expected a full-year loss of $79 million to $109 million, excluding restructuring charges. EarthLink revised its sales of $1.19 billion to $1.21 billion, down from its previous forecast of $1.23 billion to $1.24 billion.
EarthLink also offered a warning for 2008, saying it “expects industry-wide gross subscriber additions to decelerate in 2008.”
While EarthLink enjoyed early success as a dial-up ISP, it has struggled as customers have migrated to broadband, even though EarthLink resells some cable operators’ broadband services. The company has also explored municipal Wi-Fi deployments as a means to boost its bottom line, but yesterday’s announcement didn’t provide any details on how the layoffs could affect the company’s Wi-Fi plans.
EarthLink also announced that effective Aug. 27, Joe Wetzel joined EarthLink as its new chief operating officer.