Provider EarthLink, Inc. announced that it will eliminate approximately 900 jobs and close offices in several locations in the U.S. as part of a company restructuring to reduce costs. EarthLink also reduced its revenue forecast from $1.19 billion to $1.21 billion, down from its earlier estimate of $1.23 billion.
The reductions are expected to cost EarthLink $60 million to $70 million, but will save EarthLink between $25 million and $35 million during the remainder of 2007. EarthLink has had difficulty balancing the loss of its traditional dial-up ISP customers along with the hefty expenses required for building citywide Wi-Fi and mobile phone businesses in its new ventures.
EarthLink has won numerous municipal Wi-Fi contracts, where EarthLink builds the access points, wire mesh networks and administers them and the cities provide city-owned infrastructure such as utility poles and physical access that is required. These contracts have required a huge financial and time investment from EarthLink with very little guaranteed profit.
The cities that have awarded Wi-Fi contracts have not wanted to commit to guaranteed contract amounts for levels of service with EarthLink and have left EarthLink holding the bag in many instances for the cost of administration and bandwidth required to run the network.
For example, in hurricane-ravaged Orleans Parish in New Orleans EarthLink has established a 20-square mile network and is offering a free tier of service to residents and businesses in this area through wireless access on their PCs.
The number of residents and businesses returning to New Orleans has been much smaller and slower than was expected and much of the city still remains in need of major repairs after Hurricane Katrina and broken levees flooded the city and financially devastated the surrounding areas.
EarthLink has also invested huge amounts into its mobile joint venture, Helio. This joint venture with SK Telecom of Korea started with a joint investment of $440 million, but reportedly will require an additional joint investment ranging from $50 million to $100 million.
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