Buffeted by a poor economy and overextended by its Exodus acquisition, telecom giant Cable & Wireless this morning announced a sweeping restructuring that includes cutting 3,500 jobs and drastically reducing its U.S. and European presence.
The company's Internet services arm, Cable & Wireless Global, will be hardest hit, seeing 19 of its 42 data centers closed. The unit provides Internet access, virtual private networks, Web hosting, among other services. It will continue to serve multinational enterprises and service providers but will not seek out domestic customers.
"We will continue to serve existing U.S. domestic customers where we have capacity and where it is profitable to do so," Chad Couser, a C&W spokesman told internetnews.com.
C&W's content delivery business will not be affected, Couser said.
As part of restructuring plan, C&W, which enjoyed rapid expansion by operating mobile networks in the late 1990s, will focus on the United Kingdom and Japan, which it sees as stronger markets for national service.
Overall, the moves, to be implemented over the next 12 months, are projected to save C&W about $635 million annually. They will cost the company about $1.27 billion, mostly to jettison property and network leases.
But even without an industry turnaround, Wallace predicted the C&W would reach cash flow break even by March 2004.
So what precipitated the massive overhaul? During the last year, C&W has been hit with a one-two punch: plummeting revenues caused by a global economic slump; and a $850 million gamble on Exodus Communications, a bankrupt provider of Web hosting and content delivery services.
There was too much competition in the space (from Genuity, NaviSite and Level 3 to name just three) and C&W Global never drummed up enough customers to make a profit.
During a month-long review, Wallace and other executives considered pulling out of the United States and Europe altogether, but decided there is enough business with multinational firms to maintain a presence.
Closing the networks would "only would remove the ability to differentiate against competitors," the company said. "Revenue and margin would also decline over time for those multinational customers based in the UK and Japan."
The moves were not unexpected. Talk of severe cuts has been circulating for the last month as the review got underway.
A C&W spokesman was not immediately available to discuss what the moves meant for U.S. customers.
This article originally appeared on internetnews.com.
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