Today Earthlink revealed the first phase of their anticipated corporate restructuring. The company will eliminate 900 jobs and close offices in several locations. Facility exit and restructuring costs are estimated at $60 to $70 million. The company will also boost the share repurchase program by $200 million.
These are the first steps taken by new CEO Rolla Huff, who is expected to get Earthlink back on track. In the press release today, he stated that additional steps can be expected in the coming weeks and months. Many are expecting that his next moves will be to exit Earthlink's money losing ventures in municipal wifi and Helio, leaving the company with only their profitable but diminishing ISP business.
The new CEO has already made comments about the muni wifi business not providing an acceptable return, dragged his feet on San Francisco, and today Chicago scrapped their wifi network plan. Based on this, it seems likely that Earthlink will continue to head for the exit on muni wifi.
Things look different on the Helio front. As recently as last month, Earthlink invested another $30 million in Helio, also committed to invest up to $100 million more. The Helio CEO Sky Dayton is the founder of Earthlink and a current board member. Exiting Helio seems complicated and contradictory to the recent investment.
So what lies ahead for Earthlink? Are they going to stake their future on Helio and hope that it doesn't go the way of Amp'd Mobile? Are they going to become a lean cash generating ISP and funnel the money to shareholders through dividends and share buybacks? Or is Rolla Huff prepping the company for a sale?
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