Mpower revises Q3 and Q4 outlook

Mpower Communications Corp. (Nasdaq: MPWR) was down 27 percent ahead of Friday's opening bell after it announced revised forecasts for the remainder of the year, and a charge of up to $13 million to reorganize its business.

Shares in the provider of broadband data, Internet and telephony services to business customers were down 3.31 to 9 before the bell.

Mpower now projects revenue of $38 to 39 million, and EBITA (earnings before interest, taxes, stock-based compensation, depreciation and amortization) of negative $53 to $58 million for the third quarter of 2000. For the fourth quarter, revenue is now predicted to be $43 to $46 million, and EBITA is expected to be $52 to $55 million. First Call was expecting a loss of 1.33 and 1.51 a share, respectively, for the third and fourth quarters.

In addition, Mpower said it will see a one-time charge of $12-13 million to recognize costs associated with network optimization, and a $6 million one-time gain associated with the settlement of switched access disputes.

The company got ahead of itself in pioneering its Voice-over-SDSL (Symmetrical Digital Subscriber Line) applications, and ILECs (incumbent local exchange carriers) have been unable to keep up with it and provide enough VoSDSL capable loops.

"As we rapidly built out a national SDSL network over the past nine months, we have been faced with the ILECs inability to adequately provision at levels concurrent with our customer demand,'' said Rolla P. Huff, Mpower Communications President and Chief Executive Officer.

To accommodate the growing demand for its bundled service offering, the company has begun to retrofit its network to also provide voice services, but the initiative has taken longer than expected, lagging behind the sales organization. "We have reached the point where our current sales and provisioning expense structure has outpaced our current network deployment," Huff said in a statement. The company said its business plan has centered around a facilities-based bundled services offering without reliance on non-recurring or wholesale revenue streams.