Sprint to close Web hosting unit

The long-distance telephone expects about $500 million in charges due to costs of severance agreements for three former executives and a decision to close its Web site hosting unit.

Reuters

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July 10, 2003 8:00 a.m. PT

2 min read

Long-distance telephone company Sprint said Tuesday it expects about $500 million in charges in the second quarter due to costs of severance agreements for three former executives and a decision to close its Web site hosting operations.

The Overland Park, Kan.,-based company Sprint said it would cut about 500 jobs as it closes the Web hosting business, which manages and operate Web sites for corporations.

It will also take a pre-tax charge of $400 million to $475 million to write down of the value of the assets and cover costs to terminate leases, fire employees and shift customers to other carriers.

Shutting down the Web hosting business, which had about $60 million in revenues for the 12 months ended March 31, is the first major strategic decision by the company's new chairman, Gary Forsee.

"Sprint's priorities...include growing top-line revenue and protecting and improving the company's bottom line," said Howard Janzen, president of Sprint's core long-distance unit, Global Markets Group. "Those priorities require us constantly to monitor and review which areas make both economic and strategic sense to pursue."

The company competes in the Web hosting market against rivals such as AT&T, WorldCom, Qwest Communications International.

Sprint, the No. 4 U.S. long-distance telephone company, said it would shift its current Web hosting customers to other carriers and would no longer pursue contracts with companies for hosting-related services.

Sprint also will take pre-tax charges of about $36 million related to the separation agreements for William Esrey, its former chairman and chief executive officer; Ronald LeMay, former president and chief operating officer; and Richard Devlin, former general counsel.