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New Edge Cuts 55, Scales Back Operations

The mood was a somber one at New Edge Networks Thursday after officials cut 55 employees and announced its intentions to power down digital subscriber line service in Georgia and Florida.

Citing a tight capital market and its desire to focus energies on the profitable advanced broadband solutions for its business-class of services, New Edge told affected employees Thursday morning of its decision.

Officials said its current DSL service nationwide remains unaffected, and that service to its customers would continue.

Instead, the company plans to take the money its saves from future DSL expansion and invest it in its nationwide asynchronous transfer mode (ATM) network.

Officials expect to reap higher profit margins offering a bundled virtual private network of voice, data, IP and video to businesses, opposed to the relatively low profit margin found in consumer DSL service.

According to Sal Cinquegrani, New Edge spokesperson, the company is doing everything in its power to make the transition as painless as possible.

"These are always tough situations, we've lost a lot of good people today, but we'll do whatever we can to find them new opportunities, Cinquegrani said. "They're good people, and they're going to find new opportunities. If things change for us, we'll gladly hire them back. Which is exactly what we did last time we had a round of layoffs."

Last November, the company eliminated 135 jobs to "stay on a path to profitability and stretch a new cash infusion through much of next year," a company statement read.

Affected employees, most located at the New Edge headquarters in Vancouver, WA, were given a severance package, stock option vestings, counseling and job-hunting assistance.

Also announced was the company's decision to power down the DSL equipment it had only just started operating recently. Georgia went online last month.

According to Cinquegrani, less than 100 customers are affected by the news, and that New Edge officials would work with them to get switched to another provider.

Thursday's announcement marks a change in the company's strategic plan, which last year was the same as many broadband providers - becoming first to market providing DSL service.

New Edge's distinction was its plan to serve mainly the second- and third-tier communities that are passed over by many of the larger data competitive local exchange carriers like Covad Communications Group and .

By bridging the "digital divide," the company expected to garner a significant market share in these underserved areas of the country.

It's an idea that was reaping benefits, especially when many of the larger providers started running into deployment problems last year. Officials credit a 60 percent surge in sales last month to the customers leaving those providers for New Edge.

But, with the burst of the Internet bubble and low profit margins, company President, Co-Founder and Chief Executive Officer Dan Moffat said a change in direction was needed in the new millennium.

"The actions we are taking today are painful because they involve the displacement of employees who signed on to our vision of bridging the digital divide with DSL," Moffat said. "However, the investor environment has changed and we cannot operate in year 2001 with a 1999 plan."



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