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DSL.net Circles Wagons
Trims workforce 28 percent as market sours
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Business New Haven
12/11/2000
By: Michael C. Bingham
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New Haven's DSL.net has taken a tumble. Now, it remains to be seen whether the company can hold on until help arrives.
On December 1 the company announced that it would slash its workforce by 28 percent - some 141 jobs in all - to curtail spending and allow more time to raise additional capital in market turned skeptical of high-speed Internet access providers.
DSL.net said it would take a restructuring charge of no more than $1 million in the fourth quarter for the move, which company officials said would yield savings of about $8 million in fiscal 2001.
“The decision to reduce the workforce was made in conjunction with our decision to slow the deployment of our network into new territories, and then focus on continued revenue growth and quality customer care,” said DSL.net president and chief operating officer Keith Markly in a prepared statement.
Following the announcement, DSL.net stock closed up 5/16 at $1.375 - far off its 52-week high of $32.5625, recorded in February. The stock is more than 95 percent off its all-time high.
Only four days before the layoff notice, DSL.net announced that it had received competitive local exchange carrier (CLEC) authority in Alaska, meaning it was now authorized to provide communications services in all 50 states plus the District of Columbia.
DSL.net does not suffer alone. Many independent U.S. providers of digital subscriber line Internet service, which offers high-speed data transmission and Web access, have faced mounting difficulties tapping into capital and equity markets to fund operations as they push toward profitability.
Earlier this month top U.S. telecom provider Verizon Communications backed out of a deal to acquire a majority stake in NorthPoint due to deterioration in NorthPoint's finances and operations. Also, Covad announced December 3 that it would trim its workforce by 13 percent as it struggled with delinquent payments from Internet service provider customers.
Through the first nine months of 2000, DSL.net posted losses of $75.9 million ($1.27 per share), and those were expected to mount by year's end. The company said it ended the third quarter with $109 million in cash and marketable securities; it also noted about $10.8 million in long-term debt obligations.
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