Cable & Wireless de-emphasizes its U.S. business

LONDON - As a result of the major restructuring that Cable & Wireless announced last week, many of the carrier's U.S.-only customers soon will hear that their business is no longer wanted.

The company, which racked up $7.18 billion in losses and saw revenue plummet 30% during the first half of the year, will look to return to profitability by narrowing its focus to multinational customers.

C&W is drastically reducing its presence in the U.S. and Europe in terms of cities served and data centers. The company also is axing 3,500 employees, mostly in the U.S. However, C&W says it is retaining enough of a presence to serve multinationals.

To continue reading, register here and become an Insider. You'll get free access to premium content from CIO, Computerworld, CSO, InfoWorld, and Network World. See more Insider content or sign in.

LONDON - As a result of the major restructuring that Cable & Wireless announced last week, many of the carrier's U.S.-only customers soon will hear that their business is no longer wanted.

The company, which racked up $7.18 billion in losses and saw revenue plummet 30% during the first half of the year, will look to return to profitability by narrowing its focus to multinational customers.

C&W is drastically reducing its presence in the U.S. and Europe in terms of cities served and data centers. The company also is axing 3,500 employees, mostly in the U.S. However, C&W says it is retaining enough of a presence to serve multinationals.

The announcement comes after C&W's decision two months ago to sell part of its data service customer list to New Edge Networks. New Edge agreed to pay up to $4 million, depending on how many of the 1,500 customers move over to it.

C&W declined to say how many more customers the restructuring could affect.

Software maker Network Intelligence is not waiting to find out.

"We have heard about [C&W's] restructuring plans and are in the middle of finding another provider," says Sean Armstrong, senior Internet manager at the Walpole, Mass., company, which uses C&W collocation services. "If they are only servicing multinational customers, I would have to think that it would have a major effect on the Waltham [Mass.] data centers, which are already over half-empty."

Graham Wallace, the carrier's CEO, says C&W's "marketing and pricing were not as good as they should have been." Those are reasons why C&W experienced a high amount of churn and lower-than-expected revenue with its Web hosting business.

C&W made a number of acquisitions to boost its Web hosting business, most notably its $750 million purchase of bankrupt Exodus."[This restructuring marks] the death of the Exodus brand. It's . . . Cable & Wireless saying they think they can only make money in this business if they do it for the high-end type of clients," says Andy Schroepfer, president of Tier 1 Research.

"Who gets screwed here are the average clients with a couple of servers or a couple of racks . . . in some of the markets that aren't as big as New York or California," he says.

Observers say C&W will be challenged to bounce back despite its drastic moves. It says restructuring costs will add up to $1.3 billion, taking a good chunk out of the company's $3.5 billion in cash.

Read more about lans & wans in Network World's LANs & WANs section.