Allied Riser slashes work force by 75%

Broadband data network provider Allied Riser Communications will reduce its work force by 75%--about 290 employees--during the next 60 to 75 days, suspend retail sales and transition its current retail customers to other service providers as part of a plan to cut costs and refocus its business.

The company plans to shift its focus to selling fiber on a wholesale basis to national service providers, and leasing its in-building facilities to wireless service providers “looking to improve the performance of their systems inside commercial buildings,” according to Jerry Dinsmore, chairman, president and CEO. The company’s network is deployed in more than 900 commercial office buildings throughout the United States and Canada.

Peter DeCaprio, analyst with Thomas Weisel Partners LLC, said the number of leased circuits coming up for renewal in the third and fourth quarters of this year forced the company’s hand.

“They were at a decision point: Do we renew, do we not renew?” he said. “I think the company decided that it was probably best to conserve cash at this point and … unwind the retail organization so they don’t have to recommit to those circuits.”

DeCaprio said the huge work-force reduction “probably signals the beginning of the end” for Allied Riser; he expects the company to be sold at some juncture.

“I’m not sure that they can make a go of it,” he said. “The key is whether there is enough of a wholesale market. That’s the unknown. … They’re going to have to quickly start lining up wholesale partners.”

With an estimated $150 million in cash on hand, DeCaprio believes Allied Riser has about 12-18 months to reinvent itself before a sale of the company becomes the only viable option. He’s not hopeful it can be viable on its own.

“They could reinvent themselves, but the same thing will happen to Allied Riser that happened with Broadband Office; they just basically maintained their cash so they could negotiate a more effective sales price,” he said.

Yipes Communications yesterday announced today it has acquired the rights to serve more than 3500 office buildings nationwide from Broadband Office, which is in Chapter 11 bankruptcy proceedings. DeCaprio said Yipes also should consider buying Allied Riser.

“Anybody that’s doing an Ethernet play has to look at Allied’s assets, because they’re more extensive than anybody’s. That to me would be the likeliest outcome.”