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Rhythms NetConnections Inc. has joined the club of competitive broadband service providers engaged in major retrenching. In an effort to conserve enough cash to meet operational needs into the first quarter 2002, Rhythms last week fired 450 employees, or 23 percent of its workforce, and scaled back its business plan to concentrate on its 40 largest U.S. markets.
The move should save about $80 million in 2001 and result in negative $395 million in EBITDA (earnings before taxes, depreciation and amortization.) That's about a 15 percent improvement over previous analysts' estimates, Rhythms says. The company expects to take first-quarter 2001 charges of between $15 million and $17 million for the restructuring.
In the wake of NorthPoint's Chapter 11 filing, Englewood, Colo.-based Rhythms also cast a net out for ISPs having trouble getting their DSL line needs met. Rhythms says it's already transitioned the vast majority of 7,000 lines it acquired from Flashcom Inc., shortly before that company filed for bankruptcy protection last month.
The Flashcom additions give Rhythms about 67,000 DSL lines in service as of Dec. 31, up 43 percent from the end of the third quarter 2000.
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