Earthlink Slashes 40% Of Workforce and Ups Stock Buyback

Earthlink, the U.S.'s 4th largest internet provider, announced it was cutting 900 jobs, more than 40% of its workforce, in an effort to cut costs. The company will close offices throughout the country, saving an anticipated $25 million to $35 million by the end of 2007. CEO Rolla Huff had announced in July that the company would consider its options after sales slipped 6% last quarter due to declining internet subscriptions. Earthlink also altered its guidance, changing forecasted 3rd quarter sales to between $200 to $300 million and a loss of $33 million to $43 million. Prior guidance had the company's sales between $295 million and $300 million and a loss of $40 million to $50 million. In addition, the company's board agreed to increase the company's existing stock repurchase plan by $200 million to $270 million. "While we see this as an important first step in unlocking the underlying value that we believe is in our company, we are only eight weeks into the process of repositioning EarthLink for the future. These changes get our cost structure in line, but there is much more to do," Huff said. "We expect to announce additional steps as we continue our work over the coming weeks and months." Earthlink spiked up 10.2% to $7.56 midday Tuesday.

Sources: Press release, Bloomberg, AP
Commentary: Street Awaits EarthLink's Restructuring Moves • Earthlink, Where's my WiFi?
Stocks/ETFs to watch: ELNK. Customers: T, VZ. ETFs: HHH
Earnings call transcripts: EarthLink Q1 2007

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