22 Comments

Summary:

[qi:004] EarthLink (ELNK), the Atlanta-based Internet Service Provider that has been taking it on the chin in the stock market for the past few months, is in for some major bloodletting, perhaps as soon as tomorrow. It’s been hard to reach some of my easy-to-reach sources; […]

[qi:004] EarthLink (ELNK), the Atlanta-based Internet Service Provider that has been taking it on the chin in the stock market for the past few months, is in for some major bloodletting, perhaps as soon as tomorrow.

It’s been hard to reach some of my easy-to-reach sources; they all seem to have gone to the ground, as they say. That is not a good sign.

The shake-up is expected, with Wall Street analysts such as Cowen & Co.’s Jim Friedland betting that recently appointed CEO Rolla Huff will take tough measures, including making major cuts to the dial-up side of the business. Other options include selling off the New Edge Networks division, which sells data services to small- and medium-sized businesses. EarthLink acquired New Edge Networks in April of 2006.

The biggest shake-up, however, is likely to come in EarthLink’s municipal wireless group. The MuniFi experiment hasn’t gone according to plan, even though the company was successful in signing up quite a few cities for MuniFi networks. But Earthlink’s San Francisco-effort, for example, is mired in a political morass. The Arlington (Virginia) and St. Petersburg (Florida) MuniFi networks are currently on hold.

We are being told that Don Berryman Don Berrymore, who used to run the MuniFi business, left the company three weeks ago. (They are not the only ones suffering from the MuniFi-related issues.)

More importantly, the company is carrying the costs of Helio, an expensive MVNO effort. Helio, after starting out with $440 million in backing from SK Telecom and EarthLink, recently raised another $200 million ($100 million each from the two partners.) Will Earthlink follow through with this (and future) investments, remains to be seen.

Helio is estimated have $40 million in operating costs, not an easy pill to swallow considering that the company continues to lose subscribers in its core ISP business.

EarthLink is between the rock and a hard place: If it gets rid of those money-losing businesses, then it is left with a business whose growth engine is negative.

You’re subscribed! If you like, you can update your settings

  1. EarthLink Employee Monday, August 27, 2007

    The latest story on EarthLink is incorrect.

    Don Barrymore doesn’t work for EarthLink.

    Don Berryman does, and is very much still at EarthLink – he walked through the halls of Muni this morning.aac

    About the only thing spot-on here is the fact that announcements will be made tomorrow.

  2. For Earthlink Black Tuesday Looms: Job cuts, restructuring – GigaOm : Small Black Business Owner: Operating in the black Monday, August 27, 2007

    [...] Read more of this story… August 27, 2007 | Filed Under mortgage news  [...]

  3. Don Berryman is a bust. The guy ran customer service until muni-fi, which is hardly a strong background to lead a new product initiative.

    The rumor I hear is they will be significantly cutting muni-fi, the voice initiatives, and all around belt tightening around the company. They are going to be offering large severance packages.

    Helio is an even bigger bust. Don’t call it a phone, call it a train wreck. iPhone stole any chance this long shot product ever had. But in strong earthlink fashion, they threw good money after bad by doubling down on their investment.

    The new CEO will get religion and just milk the cash cow and stop wasting money on growth initiatives. What new products has Earthlink successfully introduced?

  4. For Earthlink Black Tuesday Looms: Job cuts, restructuring – GigaOm » Get the business advice that makes opportunity possible on AfricanAmericanBusinessOwner.com. Monday, August 27, 2007

    [...] Read more of this story… Permalink: For Earthlink Black Tuesday Looms: Job cuts, restructuring – GigaOm (No Ratings Yet)  Loading …  Print This Post [...]

  5. EarthLink Readies Big Layoffs, Reorg Announcement?

    A rumor is running the circuit today that ISP EarthLink will announce tomorrow a major reorganization and a slew of layoffs, a not-surprising move given the deteriorating state of the once-hot company’s finances. Indeed, when EarthLink announced …

  6. Rand al’Thor Monday, August 27, 2007

    Take a look at Rolla Huff’s contract:

    http://www.sec.gov/Archives/edgar/data/1102541/000110465907049774/a07-17410_1ex10d1.htm

    Is it standard for a contract to be structured this way if you expect your new CEO to continue running the company as a viable enterprise? It seems he is expected to sell it off in relatively short order.

  7. Bloodletting to come at EarthLink?

    Om Malik, who made his name as a reporter covering broadband and Internet access companies, says EarthLink could announce massive restructuring and layoffs as early as Tuesday. EarthLink (ELNK), the Atlanta-based Internet Service Provider that has been…

  8. With divisions like New Edge being run by a group of rookies I wouldn’t doubt it. “Hey, I have a great idea, lets buy a couple of companies to change our dying business model!” “Also, when we buy these companies lets do just about everything wrong with them so that the reason we bought them no longer exists within a year!” I can say this because I have seen this happening internally and externally at this company. Instead of Right.Now it should be Right.Divest!!! The only way I can describe this company in the past, before Rolla, was a good old boys club of folks who made money and survived the hey day of telecom, but when the going gets tough and they had to do “REAL” business they failed. Inflated salaries and titles only carry you so far!

    Cheers!

  9. For Earthlink Black Tuesday Looms: Job cuts, restructuring – GigaOm : Small Black Business Owner: Operating in the black Monday, August 27, 2007

    [...] Read more of this story… August 28, 2007 | Filed Under mortgage news  [...]

  10. Blacknell.net » Arlington Wifi On Hold Tuesday, August 28, 2007

    [...] that equipment in Alexandria simply sits on the poles while Earthlink sorts itself out (Om Malik is reporting that Earthlink is considering selling its municipal network division). You can leave a comment, or [...]

Comments have been disabled for this post