Covad Reduces Staff By Another 400

Covad Communications continues its cost-cutting measures with the release of another 400 employees and 200 central office closures Friday.

It’s the second round of layoffs in a month for the financially-challenged competitive local exchange carrier as it strives to reach market stability in the troubled high-speed Internet access industry.

Today’s cuts come from Covad’s fledgling Business Solutions division, which was created from the acquisition of BlueStar.net in September.

According to Martha Sessums, Covad spokesperson, the affected employees were notified this morning and all will receive between one to three months severance pay, dependent on pay grade.

“We’re still conducting our employee assistance program and I was told a couple days after (the Nov. 27 cuts) that several hundred had made use of the program,” Sessums said. “This kind of program is typically very successful.”

Also affected by the cuts were approximately 200 central offices throughout the country which were either under-performing or not fully built out. It’s a sign of the CLEC’s deployment slowdown as it concentrates more on what it has than on what it could have.

Chuck McMinn, Covad chairman, said the closures were a necessary step to reach profitability.

“In order to satisfy market priorities and achieve profitability sooner, we will continue to look at every aspect of our business and take the necessary steps to control costs,” McMinn said. “By controlling costs, we expect the expense levels of the company to be significantly reduced for 2001. Today’s cost-cutting efforts are concentrated in our direct channel. We will continue to evaluate other ways to maximize efficiency and productivity to reach our profitability goals.”

Today’s employee reductions and CO closures are the latest efforts detailed by Covad when it revised its fourth quarter earnings statement to reflect increased financial pressures Dec. 12.

Covad blamed its shortcomings on 14 broadband Internet service providers which had failed to pay for the digital subscriber lines it had ordered, prompting a total loss of approximately $10 million in fourth quarter revenues.

To cut its losses, Covad announced a restructuring charge in the fourth quarter of $20 million to cover one-time costs. Employee severance checks were covered under that charge.