Genuity Cuts To Lower Costs; Expands
Verizon Pact
By Susan Rush
from BroadbandWeek Direct, May 2, 2002
Although first-quarter revenue was in line with estimates,
Genuity Inc. is taking steps to reduce costs, including eliminating
jobs, exiting some international business and slashing capital
spending. Separately, Verizon Communications agrees to an expanded
deal with Genuity.
Citing the need to meet its financial and operational targets,
Genuity will reduce its headcount by as many as 1,200 employees
during the second quarter. Genuity plans to exit the professional
services business in France, Italy and Spain, and intends to assess
the potential of all of its international operations.
A slower near-term growth market is forcing the company to curb
its cash capital spending from a previous target of between $500
million and $600 million to between $400 million and $500 million.
Further cost-cutting measures are being considered, including
consolidation of data center and administrative facilities.
Separately, Genuity announced an expanded commercial relationship
with Verizon Communications Inc. Under the terms of the expanded
deal, Verizon will refer customers to Genuity's voice over IP
service, dubbed Black Rocket Voice. Genuity also becomes Verizon's
preferred provider of IP backbone services. Verizon, which owns
about an 8 percent stake in Genuity, will resale Genuity services
in states where it offers Internet and long-distance services.
In May, Verizon upped its credit support of the company to $2
billion.
In January, Genuity signed up Verizon and Cisco Systems Inc.
as its first Black Rocket Voice customers. Black Rocket Voice
is designed to integrate voice and data traffic onto a single,
multi-protocol IP network infrastructure utilizing Genuity's Tier
1 IP backbone.
In the first-quarter, Genuity reported revenue of $282 million.
Excluding items, Genuity posted a pro forma loss of 25 cents a
share, which beat analysts' consensus estimates by 2 cents a share,
according to Thomson Financial/First Call.
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