According to an article by Kelly Teal over at Channel Partners Online, Earthlink laid off 495 employees last week. That’s not a minor number of course, as according to its earnings release the company ended Q3 with 3,264 employees and this RIF would therefore be about a 15% haircut.
The cuts seem to come primarily from the traditional CLEC businesses they acquired two years ago now – Deltacom and One Communications. They have spent that time working to shift their overall business model to one of a cloud-based IT services provider serving multi-site customers. The network assets and the existing customer relationships they acquired underly those plans, but the company has been quite clear that they had no intention of being a super-CLEC. Thus something like this was inevitable, not that it makes it any less painful for those involved.
Channel Partners suggests that what Earthlink is doing is offloading much of the direct sales and support for the more traditional integrated T1 side of the business to the channel. They clearly want to focus their efforts on building profitable processes for the new stuff rather than managing the old. That does sound likely and the increased revenue opportunities will certainly make agents happy, and perhaps will simultaneously give them a stake in the rest of Earthlink’s IT services transformation.
Earthlink is still looking for the inflection point where growth of its newer services and capabilities fully offset the steady churn of legacy customers and products. That the RIF is 15% all at once suggests that plans shifted rather suddenly, perhaps reflecting a growing level of impatience with the pace of the transformation.