Digital Broadband guts workforce

(Telephony) Digital Broadband, a privately held regional service provider, announced late yesterday that it would be laying off 85% of its workforce--450 employees out of 526--due to “adverse market conditions” and an inability to attract sufficient additional financing to fund its business plan.

According to Valeri Marks, president and CEO of the voice and broadband services company, Digital Broadband had been trying to raise a Series D round of funding since September. Although the company had received commitments for about half of the $140 million it needed to fully fund its business plan, it was having trouble coming up with the remainder, Marks said.

“In the end, even though we had a great business plan and we’re managing Verizon very tightly, it all came down to what was happening in the external capital markets,” Marks said. “Everyone was looking at national providers losing 90% of their market value and we couldn’t get anyone to invest at this point in time.”

As late as March 2000, Digital Broadband raised $74 million, bringing its total venture capital funding to $88 million. Thomas H. Lee Partners, Alta Communications, and BancBoston Ventures were the largest venture investors. The company also had a $100 million credit facility from Cisco Capital, $70 million of which has already been drawn down.

Digital Broadband, formed in March 1999, has approximately 1,000 customers located throughout seven Northeastern states: Massachusetts, New Hampshire, Rhode Island, Connecticut, New York, Pennsylvania and Maryland. Two thirds of those customers purchase digital subscriber line (DSL), frame relay or T1 services from Digital Broadband, while one-third are voice-only customers, Marks said.

The job cuts were made so that Digital Broadband could focus on its current customer base, Marks said. The company is exploring all strategic and tactical alternatives to remain in operation, including a merger or outright sale of the company, Marks said.