NorthPoint lays off 19 percent of staff
The struggling wholesaler of high-speed Internet connections that recently saw its deal with Verizon scuttled lays off 248 employees, or about 19 percent of its work force.
The layoffs, employees were informed Thursday, cut across all of NorthPoint's business units and primarily affected workers in the company's Emeryville, Calif., office and San Francisco headquarters.
The layoffs are intended to allow the company to borrow more money, representatives said.
"One of the reasons for the staff reductions is to meet some numbers so that we can draw down on some existing bank agreements," said NorthPoint spokesman Marvin Wamble.
Baby Bell local phone giant Verizon Communications and NorthPoint were expected to merge their assets, but Verizon called off the deal last month after financial difficulties cropped up for NorthPoint.
After the failure of the Verizon deal, NorthPoint--which had about $150 million as of September--is believed to have only enough cash to continue operations through the middle of the first quarter of 2001, raising speculation that the company will soon be forced to file for bankruptcy.
"There's been no talk of that at this time," Wamble said. "We're looking at all of our options."
Dozens of high-speed Internet access providers and the broadband companies that supply them are facing tough times. Intense competition, high advertising and promotion costs, and limited investment capital--compounded by slow installations--are strangling many small start-up broadband companies.
"This is a very difficult time at NorthPoint Communications," NorthPoint chief executive Liz Fetter said in a statement. "We had been expending considerable time and effort toward completing the merger with Verizon.
"Now, however, we must explore all options for reducing expenses, including laying off many valued employees," she said. "Despite this setback, the leadership team and employees of NorthPoint Communications are committed to remaining one of the major players in the surging DSL marketplace."
NorthPoint is not alone in its woes.
Late Wednesday, HarvardNet, a regional broadband ISP, laid off more than
half its work force and announced a plan to abandon the digital subscriber
line (DSL) business in favor of Web hosting.
Covad Communications, a direct competitor to NorthPoint, laid off 13 percent of its workers in November after announcing poor financial results and the resignation of CEO Bob Knowling.
Rhythms NetConnections, a similar competitor, detailed its financial situation Thursday, indicating that the DSL wholesaler has enough capital to fund operations through the end of 2001. Rhythms said its relationship with two major ISP resellers, Flashcom and Telocity, are solid and that both ISPs are current in their payments to Rhythms. Many broadband ISPs have been delinquent in their payments to suppliers such as Rhythms, NorthPoint and Covad.
Rhythms had $748 million in cash and investments as of September. However, the company said it is "actively exploring" additional funding.