[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.
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.
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?
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.
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!
As a former employee of Earthstink, I can say this… They have no vision and no investment in a quality infrastructure. It all starts with hiring good people (experts) and taking care of them. Furthermore, Earthstink rode the tail of Mindspring and that’s the only reason they were profitable for a short time. They don’t have a clue how to do ‘real’ business. I’m sorry, but they deserve what they get.
It’s about time that the company realized it made some really stupid moves. As an aggregator of technology, the company lacks true innovation and creatitity. As a former employee, idea people were often shut out by those who are used to doing more of the same. The muni business was a predictable bust. The acquisition of New Edge was a mistake when it was discovered that there was more than $40M in receivables. Due dillegence was done by inexperienced M&A folks. However, what EarthLink is good at is commercial finance and analysis. And analysis by paralysis proliferates the organization> Most are concerned with job titles, seniority and less concerned with actually making a difference. All those in the VP levels really need to take a good hard look at themselves and what contributions they can effectively make without drinking their own coolaid! I really enjoyed working at EarthLink. But they didnt recognize the value I could bring to the company on the planning side. Maybe too self absorbed at the exec. level.
this sounds more complicated than rocket science. i say they just fire everyone and start over
http://www.drunkenpanda.com
Well it’s black tuesday and some of your article is correct however Newedge stays in place as a owned subsidiary but operating on it’s own. with 25 Laid off at new edge. simply trimming and streamlining. no “sell off” of newedge is in the works at this time.
Boy, or boy! And how great was working for ELNK 7 years ago… and 5, and even 3… When Garry was still alive… He knew was he was doing…Bye-Bye, ELNK!
I hope this company burns. They are locusts. They show up, consume morale and money, and leave the brittle corpse behind on a good day. It would be the best birthday gift I get this year.
So what do they do with New Edge? Is it a decent company outside of ELNK? Who would make sense to acquire New Edge?