NorthPoint slashes workforce

NorthPoint Communications, fresh from being left at the altar by Verizon Communications, announced that it is laying off 19% of its workforce, or 248 employees, to help reduce expenses. Employees in San Francisco and Emeryville, Ca., were informed of the decision yesterday.

“As a result of Verizon’s notice of termination, we must make some difficult decisions,” said NorthPoint Communications President and CEO Liz Fetter, referring to Verizon’s decision to pull out of a planned merger of the companies’ digital subscriber line (DSL) businesses. “Employees are accepting additional responsibilities to make sure NorthPoint Communications’ partners and subscribers continue to receive superior service.”

As of September 30, NorthPoint said it had cash and cash equivalents totaling about $150 million, and had begun discussions with its bank syndicate to tap on undrawn amounts in its existing credit facility. The consensus is that NorthPoint has cash to last only through the middle of the first quarter of 2001. As part of the merger, Verizon had been scheduled to provide NorthPoint with $200 million in interim financing in January.

“We believe that Verizon’s actions are breaches of its agreements with NorthPoint,” Fetter said. NorthPoint has not yet decided if it will pursue legal remedies.

NorthPoint is one of many independent DSL providers caught in a capital crunch as the public markets shun their stock and ISP customers default on payments. “It’s kind of come to light that the business model of providing data services to the business market is not as attractive as it once was,” said Jason Marcheck, broadband analyst at The Strategis Group. “From a data CLEC point of view, the costs are very high to provide the services and the margins they are returning are not that great.”