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Genuity Slashes Staff, Eliminates Businesses

Infrastructure giant Genuity Inc. , still struggling to restructure its business, said Thursday it would slash another 1,100 to 1,200 employees -- between 27 and 29 percent of its workforce -- in an attempt to streamline operations and stem the tide on costs to deliver services.

The Woburn, Mass.-based firm is also considering further consolidation of data center and administrative facilities in order to improve overall asset utilization and eliminate business offerings which are not core to its strategic goals. Also, on the international front, Genuity said it will exit the professional services business in France, Italy and Spain, and is evaluating the "ongoing profitability potential of all international operations."

The announcement accompanied Genuity's report of an operating loss of $231 million, 25 cents a share, for first quarter 2002. The numbers were actually better than analysts had predicted. According to First Call, Wall Street was looking for a loss of 27 cents a share. The numbers also compare favorably with the $294.4 million, or 30 cents a share, operating loss the firm posted in the year-ago quarter.

"We continue to make strides in running our operations more cost-efficiently in response to the challenges presented by the continued contraction of IT spending and our ability to profitably grow revenues," said Paul R. Gudonis, chairman and chief executive officer of Genuity. "As a result, we have conserved cash while maintaining the core capability to realize our future growth potential once the economy rebounds. Notwithstanding the progress to date, it is important for us to help ensure that we meet our financial objectives in this difficult environment and, as such, we are today announcing additional actions to enable Genuity to further reduce costs and meet our financial and operational goals, including further headcount reductions and reductions in capital spending."

As a result of its efforts to streamline costs, Genuity said it will reduce capital spending in 2002 from the previous target of $500 million to $600 million, and will now target $400 million to $500 million. Genuity said the reduced target reflects deferrals in light of the continued slower near-term growth environment.

Tuesday's measures add to Genuity's previous efforts to regain its footing. In third quarter 2001, the company laid off about 990 workers, about 22 percent of its workforce, and reported a loss of $300.4 million, or 31 cents a share. In fourth quarter 2001, the company exited its wholesale dial-up business, and recorded a charge of $2.7 billion to write down network assets, canceled contracts and severance pay and benefits for the laid off workers.