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Genuity Takes $2.7B Charge, Quits Dial-Up

Infrastructure giant Genuity recorded a fourth-quarter charge of $2.7 billion to write down network assets, canceled contracts and severance pay and benefits for laid off workers.

The Woburn, Mass., firm also said it exit the wholesale dial-up business, with the exception of its two largest customers AOL and Verizon . Remaining dial-up customers will be transferred to outsourcers.

"Over the past 12 months, we have taken aggressive steps to re-engineer Genuity to successfully navigate through this dramatically changed marketplace," said Paul R. Gudonis, chairman and CEO.

For the fourth quarter, Genuity posted revenues of $316 million, up 5 percent for the previous quarter and reported its first quarter of positive gross margin. Pro forma loss per share, excluding the charge, was 30 cents for the three-month period. That's a penny better than analysts expected.

Revenues for the current quarter are expected to be between $280 million and $290 million due to the exit from the wholesale dial access business and a sluggish economy. The figures were also affected by renegotiated deals with AOL and Verizon, which provide some stability through 2003.

Fourth quarter dial access revenues increased 1 percent from the previous quarter, but decreased 11 percent or $16 million from the prior year. The drop reflects the company's earlier decision to de-emphasize and now exit the wholesale dial access business.

The company operates the second-largest dial-up Internet network in the United States. It was formerly the Internet division of GTE Corp. and spun out as part of GTE's merger with Bell Atlantic, now Verizon Communications.

Despite the huge charge, investors were cheered by the company's efforts to restructure. In early trading, shares of GENU jumped 0.14, or 14 percent, to 1.15. In the last 52 weeks, the issue has ranged from 0.96 to 3.9375.