Global Crossing CEO: Revenue decline 'a good thing'

Delivering what he facetiously called a "punch line," Global Crossing Chief Executive John Legere told an audience at the CIBC World Markets Communications and Technology conference today that the company's projected decline in revenue is "a good thing."

"Our guidance of 21% to 27% revenue decline is a good thing," he said. "It's a revenue decline we're causing... If done correctly, it will enhance profitability and the pace toward profitability."

The company's first-quarter revenue was down 21% from the year-earlier quarter, and its net loss decreased less than 2% to $106 million, or $4.82 per share.

The strategy is one Global Crossing decided upon last fall: Exiting its less profitable businesses--such as the consumer, small business and trader voice markets--to accelerate the path to profitability. Focusing intently on what Legere called the "sizable niche" of providing global IP services to enterprise customers, the company took a $12 million restructuring charge in the first quarter for severance costs and closing facilities and expects another $1 million.

"We want to make sure we have our own house in order as we find our rightful place," Legere said today. "We need to develop scale in that niche." Legere called the global market for enterprise IP services the "most differentiated part" of Global Crossing's business and "a part of the industry I'm not seeing too many [companies] focus on right now. A lot of people are focused on IP, but not necessarily on the global space."

The company is also focusing on collaboration and carrier data sales while trying to expand its distribution indirectly through third-party system integrators and carrier resellers.

Slightly more than half of Global Crossing's $526 million in first-quarter revenue came from its "enterprise, carrier data and indirect channels" group, whose revenue increased 5% from a year earlier. Carrier voice revenue, meanwhile, dropped 132% year-over-year, accounting for 42% of first-quarter revenue. And revenue from the undesired businesses (consumer, small business and trader voice) dropped 13% to account for just 6% of revenue.

"Global Crossing has clearly gotten the message about profitability as opposed to top-line growth," Legere said.