DSL.net trims workforce

DSL.net today became the latest high-speed Internet access provider to take measures to improve its capital outlook. The New Haven, Conn., public company slashed its workforce by 28%, or 141 employees, in an effort to reduce spending levels and extend the time it has to search for additional funding.

The company expects to save about $8 million in personnel expenses in 2001 and incur a one-time charge of no more than $1 million in the fourth quarter of fiscal 2000.

“The decision to reduce the workforce was made in conjunction with our decision to slow down the deployment of our network into new territories, and then focus on continued revenue growth and quality customer care,” said Keith Markley, DSL.net’s president and chief operating officer.”

“They’re cutting back the number of central offices—they’re basically planning no growth in central offices for next year,” said Dan Ross, equity analyst at Sanders Morris Harris.

DSL.net’s operational central offices increased to 502 at September 30, and at October 31 totaled 540. The company ended the third quarter with 9,208 DSL lines installed in 350 second- and third-tier cities.

DSL.net is forecasting for fourth quarter revenues in the range of $7 million to $7.5 million, and an EBITDA loss of about $25 million to 26.5 million. Although the company is not burning cash as fast as DSL wholesalers Covad Communications and Rhythms NetConnections, it is in survival mode, Ross said.

“All of these companies don’t have money to get to EBITDA positive, let alone cashflow positive,” Ross said. “You have to slow your burn rate down or you’re not around.”

DSL.net ended the third quarter with cash and cash equivalents of $109 million, and it has about $11 million in long-term debt. “By now they’ve burned through at least another $20 million in cash,” Ross said.

Separately, Credit Suisse First Boston analyst Mark Kastan dropped coverage of DSL provider NorthPoint Communications today, saying the company’s “prospects for obtaining significant new funds are difficult at best given both current market conditions as well as the high degree of uncertainty surrounding the financial viability of many of [its] ISP channel partners.”