More Details on Those Changes at XO Emerge

January 27th, 2012 by · 22 Comments

Channel Partners Online has a nice report on what XO has been up to lately, as the company discussed with a group of agents yesterday.  Apparently, they’ve got a three year plan aimed at radically transforming the company’s revenue profile.

XO has long had a lot of revenues it shouldn’t ever have chased in the first place. That’s why their margins have lagged so far despite the excellent fiber assets. Until now, Icahn has directed management to act as a more of a museum curator than anything else, preserving voice revenues, LMDS spectrum etc. But after Icahn stopped playing around and took the company private, the game quickly changed. Legacy services like TDM, dialup, and DSL are being phased out, while IP-based products will get all the love.  $300M of the company’s revenue, or about 20% of their total, will be directly affected although obviously they will try to migrate customers wherever possible.

This does suggest that October’s round of layoffs won’t be the only one, given that so far only wholesale long distance voice has been turned off entirely.  I’m curious where those revenues went – maybe we’ll see them turn up somewhere else during earnings season.

But if the extent of the changes XO discussed at this meeting is representative, then it also suggests that perhaps Icahn won’t be selling the company in August as everyone thinks he intends.  Such transitions take time, and they rarely look better halfway through.  If XO had started this process half a decade ago, they’d be a very different company today.  One wonders what took them so long, as it’s more painful to do it now.

It also brings the heretofore remote possibility of XO as the acquirer further to the surface.  XO has the fiber assets, but when it comes to the right kind of revenues it still lacks scale.      The easy way forward, albeit a risky one, would be to acquire some.  I’ll have to think about who might fit the bill, just in case Icahn goes shopping.

If you haven't already, please take our Reader Survey! Just 3 questions to help us better understand who is reading Telecom Ramblings so we can serve you better!

Categories: CLEC · Financials

Join the Discussion!

22 Comments So Far

  • captain clec says:

    Shedding TDM assets and going more cloud voip services – WOW…that is a real shocker (eye roll)!!! That is what most of the companies are doing. BTW XO has has the largest VOIP market share in the US @ 22% – per the Gartner Group.

  • Anonymous says:

    Yes … More layoffs coming across the board. Sales, support, ops, finance, legal, etc. Leaders resigning …Wu last week, more to come. If Icahn is keeping XO to invest and acquire then HE will fail with current peeps running this place as Laura and Rob are amateurs. Ernie’s a good guy just way over his head.

  • Anonymous says:

    I highly doubt ICON will invest further and acquire. The business plan de jour is simply smoke and mirrors and a redoubling of efforts to put more lipstick on this pig. The senior leadership sackings thus far, like that of the Regulatory Witch a few months ago and the Legal Ice Queen last week (seriously, let’s not pretend she resigned over some philosophical or ethical matter that she couldn’t stomach and that it was somehow her choice to leave — she was shown the door and it hit her in the *ss on the way out) suggest that ICON is not really changing course or trying to make make this pig fly. If that were the case Thomas and Wagner would have been the first two to go, with Toplisek not far behind. They’re really the ones that are still there that have their hands in the business. So ICON’s not trying to make this pig fly, he’s just right-sizing it so as to be most attractive to potential buyers.

    • Anonymous says:

      Your an idiot. GC unloaded their wholesale voice business two years ago, we’re you and this TMZ site bashing them for that?

      As many have stated before, STOP USING individuals names in this blog. Attacking people is even beneath this site. Those that live in glass houses should not throw stones.

      Maybe some more ad revenue from XO or other carriers would have Rob singing a different tune? Palmetto Ethernet…seriously! TMZ has nothing on this site.

  • Brian Scully says:

    I always find it interesting when people voice their opinions behind anonymous. Sign your name and take ownership of your opinion.

    • Anonymous says:

      They can’t as their employee agreements prevent them from speaking publicly. But I find it interesting that the very same company whose BOD appointed Laura as the “interim” CEO and who then allowed people like Geller who has zero experience running a network of any size let alone XOs are now leading the various helms and they don’t like being taken to task for bad decisions. Really? Grow some thick skin.

      To the peep who said GC shut down its wholesale voice business you’re right …. Not sure about timing but about taking efforts to do that and walk away from revenue. But that successful management team did a lot more than just exit wholesale voice business …. They built solutions not fat pipes that some in management want XO to now only focus on.

      XO is going nowhere fast ….. Such a shame.

  • captain clec says:

    ….TDM, dialup, and DSL are being phased out…this is the first time I have heard the term “dial up” in yrs…this is such a “filler” story as Powell knows XO stories gets the hits to the website.

    Word on the street is that the new sales leaders have unleashed the sales folks with greater price points to negotiate and close deals faster….plus a lucrative comp plan like 3-4 yrs ago will allow the monster to be unleashed!

    • Brian Boru says:

      I don’t believe the 3 year plan is anything but a ploy by Icon to dump undesirable assets for an acquirer and justify more layoffs in order to dress XO up for sale. I don’t think he has a 3 year attention span. Look for a sale in the fall. (And substantial layoffs in between)

  • Anonymous says:

    Smokes and mirrors people, smoke and mirrors

  • captain clec says:

    All these yrs the talk has been about XO being sold…but was has happened in that time? Paetec sold, Cavtel sold, One Comm sold, USLEC sold, ATX sold, ADELPHIA sold, Qwest sold, AT&T sold – just to name a few. All this talk year in and year out and who remains in tact? XO! Stop the hate – it is not good for your health!

    • mhammett says:

      They wouldn’t have anything to do, then.

      • Brian Boru says:

        I ain’t hating. I made a lot of money off XO. I am just saying the truth. Icon had been shopping XO around. He was just to greedy to sell it in a way that didn’t give him an oversized share so he took the path he did. Check the court docs if you don’t believe XO has been on the block forever. Now he is going to strip away everything an acquirer would, artificially improve EBITA buy cutting additional staff, and stick someone else with an overpriced XO if he can with all the proceeds for himself. Caveat emptor.

      • Anonymous says:

        Captain u really think XO is in tact???? what are you smoking cause I want some

        • captain clec says:

          Brian – any and every company is on the block…my point is I have been coming to this website for YEARS – and it is the same shit different month. All these other companies have been sold while XO is still in tact. PAETEC, USLEC, CAVTEL, ATX, BROADWING, FOCAL, ADELPHIA, AT&T, QWEST, the list goes on and on. They have provided their customers more stability then the competition. I state facts – not opinon. The companies above being sold is fact!

          • mhammett says:

            If it isn’t anti-XO or anti-Level 3, the commentators don’t care for it.

          • Anonymous says:

            They provide stability at a price. From sales all the way to install, XO is piss poor at providing its customers the support they need. I as well state facts.

            • captain clec says:

              Some of us have made millions off of hugs/kisses – via referrals and customer references – for nearly a decade!

              • Anonymous says:

                WOOOOPEEEE. You must either be a current XO sales rep who reaps in those sales rewards and vacations while the rest of the workforce has not received a raise 5 years plus, or a former XO employee who smoked to much Ichan crack to know the difference between a company who is attractive to a buyer and one that is not. You say XO is still around while others have been bought and sold, did you ever stop to think why that is, no it is not because they make money LOL, no it is not because they have great senior leadership LOL, and no it is not because they offer great customer service and great products LOL, it is because when a potential buyer looks at a company they have to have some incentives to buy, great network, revenue potential, great sales records, ETC, XO offers no incentives, none what so ever.

  • Bill Peterson says:

    Here is the deal. Across the board XO sales are down. This transformation, though necessary is exactly what it seems. Cost cutting and simplification. XO needed simplification as their systems and back office support is about as bad as any carrier I have worked with. What are they good at? wholesale it seems but that doesn’t keep the lights on so what next? Small and lower mid market. not enterprise small and mid market. The new executive team really has their work cut out for them. The changes outlined are good and hopefully will stop further cuts. Rumor has it there is a reduction planned for sales managers mid February, no one is discussing this but it’s a quiet way to eliminate sales managers with the promise of creating a flatter (less expensive). Team……

  • Johnny Collado says:

    XO has been unable to grow the business because the growth strategy thus far is not one in which the customers have been captivate by a plain vanilla mediocre offering. XO has great assets, don’t forget $5b were spent back in the day. Yet the understanding of the market place is so poor that they are ALWAYS trying to play catch up. XO has a very low tolerance for risk taking or for any leadership role in the market. The owner keeps the purse strings on a short leash and there is no vision in the leadership team as they have little entrepreneurial spirit or experience running a successful company. Maybe the best thing would be for Above Net, Equinix or TWTC to buy XO and put it out of its misery! TOO DARN BAD… On the other hand what if XO aqcuired a synergistic company with a great leadership that understood the market and the business. Hmmmm!

Leave a Comment

You may Log In to post a comment, or fill in the form to post anonymously.

  • Ramblings’ Jobs

    Post a Job - Just $99/30days
  • Event Calendar