Layoffs, losses and closures continue in telecom sector

The scythe of the telecommunication and Internet downturn casts a wide arc, mowing down the strong, the weak and the in-between. On the heels of grim earnings reports from major players like WorldCom Inc., SBC Communications Inc. and Lucent Technologies Inc., other companies are beginning to trim costs even more aggressively, lay off workers, or just give up and go home.

Long-haul fibre-optic carrier Global Crossing Ltd. announced net losses of US$629.6 million for its second quarter on Wednesday, reducing its revenue outlook for the rest of the year and indicating it would cut 2,000 jobs – about 15 per cent of its workforce – to stem the tide of red ink.

Global Crossing lost $0.78 a share for the quarter ending June 30, compared with losses of $365.4 million – or $0.62 a share – for the same quarter a year ago. The company cut its cash revenue projection to a range of $6.4 billion to $6.9 billion, from the $7.1 billion to $7.3 billion range it had previously indicated it would book for the year.

Telecom equipment supplier ADC Telecommunications Inc. updated its guidance for its July-ending third quarter on Thursday. It said it would have net losses of $0.05 per share – at the low end of estimates – and would cut 2,500 jobs, adding to the 7,000 it has cut over the past year.

ADC also said it would close or reduce operations in El Paso, Texas and Copenhagen, Denmark, looking to save $50 million a quarter starting immediately. The company sold off its broadband communications division earlier this year, and plans to sell its access-products division and broadband wireless group to Platinum Equity LLC for an undisclosed sum.

ISP (Internet service provider) NetZero Inc. said on Thursday that it would cut back on the number of hours its free Internet service subscribers would be offered, from 40 hours a month to 10, and would discontinue free service in rural areas with high telecommunication costs. NetZero also laid off 66 employees, about 26 per cent of its workforce, the company announced Thursday.

NetZero is in the middle of a merger with its one-time rival in the free Internet access business, Juno Online Services Inc. The merged company, to be called United Online Inc., is expected to be the biggest single ISP worldwide after America Online Inc. in terms of subscriber numbers, according to the companies. The cost of providing advertising-supported service to customers has been problematic for the two companies, particularly with the precipitous drop in online advertising revenues for the year.

Finally, DSL (digital subscriber line) wholesaler Rhythms NetConnections Inc. finally filed for Chapter 11 bankruptcy Thursday. The deathwatch for Rhythms started in April when the company announced it would be audited as a “going concern,” notifying investors at that time that the company’s stock may be delisted from the Nasdaq exchange and that the business was up for sale.

Given the implosion of NorthPoint Communications Group Inc. a mere weeks earlier, no bailout was forthcoming. Catherine Hapka resigned as chairman and chief executive officer days after the April announcement, having pocketed about $10 million from the 600,000 shares she sold while the company’s stock floated downward in May and August of 2000. Rhythms was delisted in May and several class action lawsuits by shareholders against Rhythms are still pending.

Global Crossing, based in Hamilton, Bermuda, can be reached at ADC Telecommunications can be reached in Minneapolis, Minn. at NetZero, in Westlake Village, is at Rhythms, in Englewood, Colo., can be reached at

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