Earthlink has won a number of municipal wi-fi contracts, including San Francisco (!), but it still needs to find ways to balance its ISP business, which is struggling, with the high cost of building its municipal Wi-Fi and cellular phone businesses. The solution, at least for now, is a layoff.
On Tuesday, EarthLink announced that it would shed 900 employees. The reason was simple, said Rolla Huff, CEO of the company. EarthLink, which has had four solid quarters of losses and a sinking stock price, needs to return value to its shareholders. And this means eliminating jobs that don't help the company add subscribers or increase revenue.
EarthLink's traditional dial-up Internet access business, which has seen hefty declines in growth over the past few years, will likely see major cuts, especially in marketing.
But the company's newest initiative, building and operating citywide Wi-Fi networks, will also be hit.
One problem for Earthlink is that the municipal wi-fi projects are not going smoothly. For example, in San Francisco, although the plan has been backed by the mayor, the process has slowed to a near halt. All this, plus the loss in Earthlink's subscriber base, have created problems for Earthlink. The problems are such that Earthlink's new CEO has indicated they have to find a new business model for their wi-fi plans - and until then, halt any further expansion.