Allied Riser slashes payroll

(Telephony) Building local exchange carriers continue to teeter on the edge.

Allied Riser Communications announced it is cutting 117 employees, or 23% of its work force, as part of an effort to lower operating costs. The across-the-board job cuts include losses created by attrition since February 15, according to a statement from the company.

“These reductions reflect our ongoing effort to make judicious cost cutting decisions while preserving our pledge to deliver quality services,” said a statement from Jerry Dinsmore, ARC’s president and CEO.

ARC maintains the company is funded through early 2003. It is burning cash at a rate of about $30 million per quarter, and, as of March 31, had $195 million in cash and cash equivalents on its books. For the first three months of this year, the company reported a net loss of $43 million on $7.9 million of revenue.

In a conference call in late April, ARC announced plans to reduce cash spending by $20 million to $25 million for the full year and reduce capital expenditures by almost 50%, to $16 million. The spending cuts would lower the company’s negative EBITDA to between $105 million and $110 million, said Chief Financial Officer Quen Bredeweg.

At that time, ARC also lowered revenue growth guidance to between 15% and 25% sequentially, and it estimated that 2001 revenues would be between $40 million and $45 million.

Two weeks ago, ARC offered to buy back $150 million of outstanding convertible notes, issued last June, that are due to mature in 2007. The company is paying $280 in cash for every $1,000 of principal. The move was made to position the company to raise further funding, a company spokesman said.

In the past few months, ARC has been trying to distance itself form its BLEC peers by adding a suite of professional-services products and mixing managed IT services into broadband connectivity bundles. The company also is conducting a voice-over-IP trial with unnamed vendors that use softswitches and IP devices at the customer premises.

“We’d love to think that there’s a product that comes out the other end of it, but we’re not going to fool ourselves that a technical trial turns into a product,” said Jeff Weiss, ARC’s vice president of systems engineering.

ARC’s shares were trading for slightly more than $1 per share today, having dropped as low as 60¢ per share in April.