EarthLink Takes a Hard Look at its Cloud

May 7th, 2014 by · 45 Comments

On Monday, EarthLink reported some decent numbers for the first quarter of 2014, beating expectations on revenue and EBITDA. But the more interesting half of the story was what the company’s new CEO, Joseph Eazor, has in store for the road ahead as detailed on their earnings CC. We knew he’d be making substantial changes, but now we have the beginnings of a roadmap.

Remember all those interesting cloud-based IT services Earthlink has been assembling? Well some of them aren’t going to be around for long. EarthLink is going to be taking a hard look at each of them, refocusing on the ones that are related to networking and managed networking in particular, such as hosted VoIP, network analytics, disaster recovery, and security.

For the others, they’ll be looking at strategic alternatives. They wouldn’t give specifics on which of their products are no longer a fit, but they’re surely talking about much of what is grouped as IT services. The helpdesk and related stuff, for example, is sure to be available for a reasonable price if they can find a buyer.   What they can’t sell, they’ll likely just manage for cash as it fades away.

That may not sound like much if you haven’t followed the company, yet it’s a major about-face from what they’ve been working so hard on for the past few years.  But the past few years haven’t gone as well as planned either, which is why they have a new CEO and a new plan.  It won’t be the first rethink of a cloud effort we see in the industry either.

TRImage_138 May. 07One question that was posed (by D.A. Davidson’s Donna Jaegers of course) was whether the company might actually sell the fiber network itself and maybe lease back the capacity it needs. They didn’t say yes, but they didn’t say no either.  That could be an interesting concept…  I wonder who might want 28,000 route miles of under-utilized, primarily southeastern, regional fiber network.   Besides Zayo I mean…

Unmentioned in the call was the broader M&A opportunity the whole company might represent.  Given the price Cbeyond managed to get, I have to wonder if EarthLink might get some serious bidders looking for a bargain entry to a national customer base.

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Categories: CLEC · Cloud Computing · Financials · Mergers and Acquisitions

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45 Comments So Far

  • Anonymous says:

    Judging by the lack of responses i suppose this is a “yawn” moment for the new leadership at Earthlink. Guess leaving the former HR queen in Service Delivery and Care doesn’t matter.

  • Ray Finkel says:

    Lots of integration issues still ongoing in the back office. They had a project called big bang that failed miserably. I am guessing that Rolla bit off more than he could chew and was replaced because of that. Lots of failed promises to agents such as myself and other channel partners. Soo many products offered from all of the formers entities in the country. Sounds like they are going to focus on less products, more profits, etc. A downsize in the work force has not helped support. Alot of their offnet/resold service has went overseas. They would be better off dumping legacy technologies like DSL and POTS and stick to the hosted, mpls, etc. as mentioned above.

  • Fred says:

    Fred would like to know if ELINK owns 28,000 route miles of fiber why for the past 4 years are they pushing IT, Managed services, and Cloud which rely on leasing bandwidth from other providers?

  • Fred says:

    Fred would also like to know in what world is losing 26.5 million dollars in 1 quarter (posting decent numbers)?

    • Brian Sphincter says:

      The new CEO is hiring people who have no industry experience. Paying sales guy huge cash retention (not stock – what message does that send). Leaving HR queen in service delivery and care. What a mess. Sounds like losing 26.5 million is a good quarter compared to what will happen. More shakeups to follow i hear. good luck.

  • Tim says:

    Rumor on the street is they are getting ready for a big round of layoffs. I am hearing 25% to 35% and big cuts to come from IT services division. Speaking of that I hear that they are looking to sell the IT services division and or significantly reduce costs to partner in that space to focus more on retail and smb.

    Good luck with that strategy …. obviously the Board of Directors is not doing its job by allowing this clown show to continue. And to the first posting above – the Service Delivery and cAre functions are a joke! Worst install times in the industry. If you are an agent like me you are a FOOL for putting your brand on the line for these clowns. The former HR leader running service delivery doesn’t pencil out. period. Wake up BOD. Fire the CEO. and give one last hope for the good people at this company to potentially survive.

  • Telecom sinking lower says:

    Making an abrupt change to a very crowded “cloud” business was a dangerous move to begin with. Their product mix would make me as a customer ask “what are you selling today”. So, customers and employees are confused. Those that get laid off will be paying the price. When telecom companies don’t know how to proceed when they find themselves in such a mess tend to: Reorganize, acquire, sell, lay off, then management looks like they are actually doing something. This applies to the industry at large. Many very fine people are suffering from this debacle. Again, the only bright spot I see is TW Telecom and they are being swallowed whole into the Level 3 machine. Level 3 becomes even a bigger mess. XO is next. Who would buy Earthlink?

    • Johnny Walker says:

      No one would buy EarthLink in its current state. Lets discuss the obstacles they need to overcome first before they are viable acquisition target:

      1) B/OSS – this needs to be resolved asap. The companies integration (or lack thereof) of systems from prior acquisitions has resulted in loss of sales and revenue b/c customers, partners, sub-agents alike have experienced poor customer service from time of sale to time of delivery due to multiple systems. Fix this and drive efficiency and improve customer experience.
      2) Service Delivery and Care Repair Leadership – Having the former Chief Human Resources officer now running operational functions core to the success of a carrier with no formal background or experience is a recipe for continued disaster. What is the BOD thinking to allow this to continue?
      3) Products – figure out what you want to be, be it and do it very well. Too many products leads to many issues around integration.
      4) Network – for the most part EarthLink is a VNO – virtual network operator. They don’t have assets really west of Mississippi and the assets they do own in the southeast and northeast have some value but not enough to present takeout value options due to the failed integration.
      5) Sales, sales, sales – need sales to pick up. soon.

  • Anonymous says:

    EarthLink is yesterdays news. Look ahead to tomorrow.

  • Juicing the Books says:

    Watch for big layoffs in the next few weeks. Largest will come from IT services business unit. Sales will be off big time as well b/c the SVP of sales who lives in southeast is more worried about protecting his boys than actually delivering sales. Dont forget about the 5 month install intervals for basic things that other carriers can do in far less time. This place is a hot mess and Joe (CEO) is largely responsible for building a new team of leaders who have no experience in telecom. Finally, how the CFO remains employed is perplexing. Perhaps he will be let go when the company folds.

    • You ain't kidding says:

      Layoffs going down this friday. I am hearing its quite significant in certain business units. Effort is to close EBITDA gap due to sales miss. So hardworking people pay the price for inept sales leadership at SVP level (guy in southeast who is all about skipping appointments and talking to his people in insulting manner). Good luck.

      • Facts Based Reply says:

        This is true. Several folks were impacted from product management, ITS operations, engineering, Relationship Management, Sales, etc. Looking to close BIG sales performance GAP by laying off people. nice work Joe.

  • Insider says:

    Yippie! Another round of layoffs and re-orgs in Earthlink. Almost a monthly event. Couple that with anyone worth their weight is leaving or gone. Huge amount of useful people leaving on their own accord. IT side had layoffs along with key people leaving (read not in the good ole boy network). Toplisek continues to make a mess of this company by continually hiring unqualified people or people without industry experience. Eazor saw through part of this and let H go. H single handedly did more damage to Earthlink then anyone could imagine. H filled the ranks from his pool of unqualified buddies and destroyed a golden egg at Earthlink. H provided zero leadership nor guidance and profits tanked under his leadership. Eazor saw through this from day one and let him go.

    Toplesek is doing the same damage but I cannot imagine Eazor can let two VPs go that close. Only time will tell if Eazor will recognize the damage that Toplesek has done and let him go too.

    • anonymous says:

      Someone is angry at H. However, throwing anyone in to that mess would kill the most effective exec. My guess is that they still have an ATM backbone that is fed by DSL access on top of old fiber and core infrastructure. Where the heck do you go with that? H has very high standards for his SE force and made XO look good, even while struggling with the worse political culture in the industry. Earthlink was too under capitalized to make such a dramatic shift in market strategies. I would guess also that Toplisek was promised better support on that end.

      • Former employee says:

        There is no doubt that “Insider” person above is likely someone who was unfortunately impacted by Mr. H. I worked in his organization at EarthLink prior to leaving and he was the only leader who came in and provided a level of leadership that was so badly needed and missing.

        Importantly, he had to make changes to the organization to help position it to succeed. Some of the folks who were not supportive of his changes were pissed at him but they fail to realize he was only fixing failed decisions from prior management.

        I can honestly say while I didn’t always agree w/ Mr. H I always respected his transparency, his honesty and integrity. You always knew he was thoughtful and careful to make the best decision possible.

        • Anonymous says:

          Insider is probably Brian “Double D” Becker. He is a pathological liar, scum bag, wife cheater, liar, did i mention scumbag? He is such low class scum bag we all cheered when we learned he was “let go”. Brian was such a pathetic idiot that he should have been fired the second he learned about how useless he was. Good riddance. Blow hard.

  • Fred says:

    Lost another 20mil in the 2nd quarter. Way to go WOO HOO

  • John C says:

    Rumor is Earthlink laid off all of the IT Sales Engineers as well as all of the IT product managers , and a good portion of the IT implementation engineers and product managers last week.

    Kiss this pig goodbye as IT is out of the picture for Earthink and going back to the straight CLEC route. Only CLEC in the industry to forgo IT as I know of.

    • Joe E says:

      Some product management folks associated to the help desk business have been impacted so thats true. I have heard that several folks also from the implementation and support teams associated to IT services have been impacted as well. I just learned a senior leader in the canadian noc in St. John’s also resigned and his loss is a significant impact to the ongoing business transformation. If i didn’t know any better it would appear that the CEO is systematically eliminating IT services piece by piece.

  • Ron Burgundy says:

    There were approximately 100 laid off on Thursday with another 100 scheduled for Friday. Things are seriously broken here. They are still trying to figure out what they want to be when they grow up. Half of repair and service delivery will be outsourced to India. No copper products will be supported in the US. LOTS of good talent currently jumping ship and the rest interviewing elsewhere.

    • Anonymous says:

      Big rumor is Chief Revenue Officer being impacted this time. Next will be SVP of Sales. Also rumor is SVP of inside sales Michele will be laid off. New CEO putting EVP of product in charge of sales. Analyst think ELNK has good story around IT services and network. Odd thing is they posses no network, and have largely reduced IT services to non-focus. perplexing.

      • Laughing all the way to the bank says:

        If i were the chief revenue officer i would encourage joe to fire me. I mean i get 750k in cash through march of 2015 and then another 500k in cash at some future point according to my SEC filing. That is cash – not stock. And if Joe lays off the chief revenue officer for any reason other than a “with cause” reason – and by the way it will be hard to find cause – the chief revenue officer gets another 2M in cash severance. So i bet it would be a welcome move for the chief revenue officer. btw, if the ceo thinks his chronies he’s brought in like Rick are going to be more successful than Toplisek he’s been to one to many after hours parties.

  • dugsage says:

    I was one who jumped ship earlier this summer, after spending years there. So much disconnect and misguided loyalties, it’s amazing. Several people taking business courses for their MBA are trying to use this fiasco for course study. SD leadership still chases bottom-line revenue vs. profits/serviceability. Selling 500 locations to an inner-city clothing store on DSL is business nobody wants, but it’s what they chase.

  • Joke says:

    people are being laid off today

  • TeleDoc says:

    how many ppl were let go nationally? I know of some in Dallas office.

  • Ron Burgundy says:

    77 people were let go. There is a company wide meeting this afternoon to discuss the road ahead.

  • Ron Burgundy says:

    Another 50+ people let go today from repair and service delivery. Most of those low end jobs have been shifted oveseas to Manila and Banglagore.

    • Just In Case says:

      Ron, were there any layoffs in Operations? Is the carnage over or have you heard there is more to come? These things have happened in waves in the past. Folks in Repair have been told to ” keep quiet” so it is hard to project what is next.

      • Anonymous says:

        Project management folks not working in a work center but remotely were impacted. Additionally, several failing branch managers were giving parachutes to take on overlay sales roles to save their hides. The company is a hot mess. God bless joe eazor and his life coaches … yep, you heard, life coaches. putz.

  • Ron Burgundy says:

    No, they are moving group by group to “right size” the company. The carrier division will be sold off by Q2 to the highest bidder. To transform the company to a managed service provider. Joe wants nothing to do with facilities. The network will be sold off to Global Capacity or another nationwide provider, whomever is the high bidder.

    Riff will hit as high as 600+ when everything is said and done. No one is safe company wide unless you are an executive making poor decisions and getting a golden parachute.

    The company is worth more in parts then a whole.

    • current employee says:

      Well this makes sense…. when Joe E took over…1 Google search let me know how he works. Break it down and sell it in parts. It’s only a matter of time.

  • anonymous says:

    Selling 3400 retail location using DSL that is supposed to provide COS for voip may have helped to doom them. Ever try to provide COS over DSL?

  • Employee long gone says:

    I took a big leap of faith jump and left in 2013 for a contract position. I could see the writing on the wall, then. Best move I ever made. You can’t take three telecom companies, mash them together and come out an IT outsource company that outsources your outsource. There were some great people there but most of them ran hard and fast. Within a month the layoffs started happening every time there was a holiday.

  • Just In Case says:

    I worked there for 11 years as a legacy Choice One employee. I still have a few friends there. Mostly in operations. The Director of east coast operations was one of them, but he was let go on Friday. Very sad. Lots of great people who were good at their jobs have either been furloughed or cut bait and left. Whatever else is going on, I don’t know, but brain drain is definitely one thing that has been happening since February of 2013. What a shame.

  • Hank says:

    A little birdy told me the real number let go was over 200.

  • Ron Burgundy says:

    Yes; the final number after yesterday was 220. Based on the 2015 budget we were told this is the last of it. Current employees sharpen your resumes and update your LinkedIn profile. This roller-coaster ride isn’t over yet.

  • chuckling says:

    This goes back to when ELB first got into the real CLEC game. As a part of their speech to fire us up, they said “we’d be the primary backup provider to companies nationwide”. No desire to be the lead provider to companies…just their backup, LOL. The brain drain started immediately…to many people spent way too long building a solid fiber network only to take a backseat while we fiddled around with DSL circuits. When you take into account the low sale price, along with the horrible cost to delivery and support, we made pennies for each sale.

  • EarthLink to layoff 60 says:

    The telecom company Earthlink, which has some operations in Rochester, has notified the NYS Labor Department it plans to lay off 60 people locally for economic reasons.

    Earthlink had reportedly said last month that it was necessary to make the cuts to help realign its business plan. 52 of the layoffs are at the company’s Monroe Avenue facilities, and another 8 are at its operations on Pittsford-Victor Road.

    The company employs several hundred people locally. Earthlink officials had no comment today about the layoff notice when contacted by WXXI.

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