"We've decided to further adjust the business and integrate the business and, in doing so, we will realize an annual cost savings of between $30 million and $40 million once all this is done," says Andy Backman, VP of investor and public relations for Corvis. Backman says the restructuring should be complete by the end of this year.
The company says it will cut about 200 jobs in the process, taking its headcount down to about 1,200. The cuts will save the company about $7 million to $10 million a quarter in operational expenses, Corvis's CFO Lynn Anderson said in a prepared statement.
The move wasn't at all surprising, given that the company is still digesting the acquisition of its service provider subsidiary, Broadwing Inc. (NYSE: BRW). Indeed, sources have recently indicated that CFO Anderson was spending a considerable amount of time in Texas, working on Broadwing's books (see Headcount: Buddy Can You Share a Line?).
The cuts are almost exclusively on the equipment side, leaving fewer than 100 people at the original Corvis business, according to Smith Barney analyst Alex Henderson.
The timing of the restructuring is interesting, though, given reports last week that Corvis was not among the winners selected by the government for its Global Information Grid Bandwidth Expansion project (see GIG-BE Winners Named). "Given its lack of success in GIG-BE, we believe the company has decided to go into 'hibernation' on the equipment side and focus on running Broadwing," Henderson wrote in a note to clients today.
Besides cutting jobs, Corvis will take a charge against earnings in both the third and fourth quarters of 2003. It expects to end fiscal 2003 with about $275 million to $300 million in cash and investments and to become profitable by the middle of next year.
The company will discuss additional restructuring details on its October 30 quarterly earnings conference call.
In fact, the company has undergone quite a transformation in the past few months. Here's a recap of the wild action since June:
— Phil Harvey, Senior Editor, Light Reading