IP Democracy: 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 its Q2 07 earnings results, which were not pretty, CEO Rolla Huff said the company was exploring ways to “create a more focused business strategy and sizing our cost structure to fit our current business.”

EarthLink has been steadily losing customers as dial-up subscribers migrate to broadband options and as EarthLink’s broadband service partnerships dry up. The provider lost 177,000 customers during Q2 07 and expects to lose 400,000 to 500,000 customers during the full year. At the end of June 2007, EarthLink served a total of 4.1 million customers, down by about one million from June 2006 levels.

Not helping at all is the fact that EarthLink’s diversification efforts are flops, at least from a financial perspective. Helio, EarthLink’s wireless data and voice joint venture, is expected to lose up to $360 million this year, with half of that shouldered by EarthLink. The company’s big push into building muni-Wi-Fi networks is a failure, and all further build-outs of Wi-Fi networks have been put on hold.

It’s no surprise, then, that EarthLink’s revenue dropped 8% from Q2 06 to Q2 07, while income from operations plummeted by 26%. Given all this, the rumor of big layoffs and a corporate reorg shouldn’t be a surprise either.

Update: Over at GigaOm, an EarthLink employee confirms in the comments to Om’s post on this topic that an announcement will be made tomorrow. The company, however, isn’t talking officially about this.

Posted by Cynthia Brumfield on August 27, 2007 2:28 PM to IP Democracy