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SoftNet Downsizes ISP Channel's Operations

SoftNet Systems Inc. Thursday slashed the workforce of its wholly owned subsidiary ISP Channel by about 33 percent as part of a restructuring intended to reduce operating costs and improve revenues.

ISP Channel built its business model on partnering with independent U.S. cable providers to offer broadband Internet-over-cable to subscribers. But in the past two years the cable industry has experienced wide-ranging consolidation that has undercut the value of ISP Channel's turnkey solution.

"While high-speed Internet-over-cable is an in-demand service for customers and a sound business for cable operators, consolidation in the cable industry has markedly reduced the number of independent cable companies available for ISP Channel to partner with, and therefore, has made it difficult for ISP Channel to reach sufficient scale to meet its original business plan," said Dr. Lawrence B. Brilliant, SoftNet's chairman and chief executive officer. "Without these economies of scale, the current business model will not lead ISP Channel to profitability."

As part of the restructuring, SoftNet's board has limited its financial commitment to ISP Channel to $30 million and has told the subsidiary that it needs to be cash neutral by the first quarter of calendar 2001. SoftNet said it intends to take a charge against first quarter fiscal 2001 earnings to reflect the costs. It also said that some ISP Channel resources, including network operating capabilities, will be redirected to support Aerzone -- SoftNet's new broadband wireless subsidiary.

"We will work within these financial parameters to come to the best solution for ISP Channel's customers and business partners," Brilliant said.