Earthlink announced today that it was laying off 50% of the work force, or about 900 employees. In times where all companies are trying to economize, it seems that some of these economic moves are less than positive, for both parties.
How much can a supplier of services cut back its service people and maintain effective service? Earthlink states that the move is an anticipation of slowed growth in its customer base. It can be argued that this is really a no brainer, as co-location for DSL services is always simply a lesson in how much the telcos can cut prices for service packages to snuff out the competition.
This would be different if companies like Earthlink supplied service to areas not serviced by a telco. The money to strike out in a different direction is formidable, but there are many cases where the benefits would be more than financial. Who would not move to a similarly priced provider that has provided service to areas where no broadband service was previously available? The propaganda value would be beyond calculation.
As someone who has never seen the value-added part of the Earthlink equation, I can’t say I’ll miss the company if it quietly dies. Earthlink has never been a huge portal, like AOL or MSN, so the value is questionable for anyone.
Earthlink built a cult following during the era of dialup, which is, for most, over. It has not made any major progress in the broadband area, and has seen the dialup base erode, as most customers eschew dialup for broadband whenever and wherever possible.
In another cost cutting move, the company plans to buy back $200 million of its own stock, which will reap a small benefit in less shareholder payouts.
The company is trying to put a shine on the bad news, stating the cost cutting now will have positive effects on the services and profitability in the future – but then all companies with receding profits and a disappearing customer base make these kinds of statements.
How many actually recover?
Will Earthlink come back? Will someone in the company introduce new services to lure customers back? The future looks bleak for now.
[tags] Earthlink, ISP, dialup, DSL, cutbacks, AOL, MSN, portal [/tags]