Telecommunications network vendor Global Crossing is cutting its workforce by 600 workers, or about 15 percent of its global employees, in a cost-saving restructuring move.
In an announcement last Friday, the company said it is streamlining its operations to aim directly at enterprise customers with higher-margin global IP and managed services needs, while de-emphasizing lower-margin legacy services.
"We are focusing our efforts on areas of our business that offer long-term growth and viability, and those in which Global Crossing will maintain a lasting differentiated position," CEO John Legere said in a statement. "As we move forward, we will invest selectively in these strategic products and services, while devoting fewer resources to, or exiting, unprofitable parts of our business. Through these efforts, we have a great opportunity to enhance our global IP service offerings and deliver even better service to customers, while providing significant ongoing value to shareholders."
The Hamilton, Bermuda-based company, which has its U.S. headquarters in New York, said it will incur costs of US$12 million to US$14 million for severance payments, as well as savings of US$4 million to US$5 million for consolidation of unnecessary offices. Savings of US$41 million to US$47 million per year are expected from the employee and real estate cuts, the company said.
Also scheduled are the outsourcing of some business processes, which weren't identified.
The moves come less than a year after Global Crossing emerged from Chapter 11 bankruptcy last December. In August 2002, a majority stake in the company was bought by two Asian companies, Hutchison Telecommunications, a subsidiary of Hutchison Whampoa, a Hong Kong conglomerate, and Singapore Technologies Telemedia.
Also announced by the company last week were its first- and second-quarter financial results, which were delayed because the company had been involved in restating its 2003 results.
Revenue for the first quarter of 2004 was US$690 million, compared to revenue for the same quarter in 2003 of US$735 million. The first-quarter loss was US$113 million, compared with US$97 million one year earlier.
Revenue for the second quarter of 2004 was US$648 million, compared with US$744 million one year earlier. The second-quarter loss was US$112 million, compared with a loss of US$27 million one year earlier.
"Notwithstanding the difficult competitive environment evidenced by declining revenues industrywide, we have continued to make progress, and our first-half results are generally in line with our expectations," Legere said. "We continue to develop new products and services that leverage our unique global IP footprint, operate our network at the highest levels of quality performance, and customer satisfaction measures have shown steady increases. We are ready for growth."