Rhythms sends out pink slips

Following the trend started by NorthPoint Communications and Covad Communications, Rhythms NetConnections revealed yesterday that it too was slimming down its workforce to help it stay in business.

The company also outlined a plan aimed at aiding the company in adapting to current needs and investors' desires.

The company plans to balance its mixture of customers to around 50% large enterprises and service providers and 50% consumers, according to Catherine Hapka, chairman and CEO of Rhythms. As part of the restructuring, the company will also concentrate on its top 40 markets, and will “de-focus” on its other 18 markets, Hapka said. But those markets will not be shut down, the company will simply cease its marketing and sales efforts in those locations. Of the 1850 central offices the company currently has, it will lower the number it concentrates on to 1400.

“We are leveraging our line sharing [achievements], closely monitoring network costs, working on productivity improvements and management of SG&A (Selling, General & Administrative) costs,” Hapka said.

Further, Rhythms will benefit from its network design, according to Hapka.

“We located the splitter in the cage and can remotely test lines end-to-end,” said Hapka.

That, combined with Rhythms' emphasis on large corporate accounts, is intended to help the company survive.

Rhythms’ deals with companies such as WorldCom may help it survive the financial troubles, according to Lisa Pierce, senior U.S. telecom analyst for Giga Information Group.

But just as NorthPoint was given a breath of life from a $38 million debtor in possession grant, Cisco has apparently coughed up an additional $50 million for Rhythms. Of that amount, about $35 million will be available at the year end, according to Hapka.