Sprint will lay off about 500 workers as it winds down its Web hosting operations in the US.
The move follows the London-based Cable and Wireless (C&W) announcement on June 4 that it would abandon the US Web hosting and services market, slashing 1500 jobs in the process. C&W said it was losing about $US1 million a day in the market.
Sprint said it plans to transition current hosting customers to preferred third-party providers or partners and will no longer pursue direct sales of hosting to enterprise business customers. Sprint’s Global Markets Group will instead focus more on selling IP-related products and services that are part of hosting, such as managed services and network transport on its IP backbone.
As part of the move, Sprint will phase out operations at Sprint E-Solutions Centres in Atlanta, Boston, Dallas, Denver, Los Angeles, New York, Sacramento, and Santa Clara. Two centres, one in the Kansas City area and another in Reston, will become corporate data centres instead.
The layoffs are expected to be completed by the end of the year.
Managing director of Sprint A/NZ, David Eagle, said the company did not have Web hosting operations in the local market and would not be affected by the US announcement.
Hosting activities in the US contributed about $US60 million in revenue for the 12 months ending March 31, but the costs associated with offering services were much higher, Sprint said.
Pretax charges for the move could run as high as $US475 million, including $US300 million related to the cost of hosting assets and as much as $US175 million for customer migration, employee termination and the termination of leases.
“Sprint’s priorities have clearly been articulated and include growing top-line revenue and protecting and improving the company’s bottom line,” president of Sprint’s Global Markets Group, Howard Janzen, said. “Those priorities require us to constantly monitor and review which areas make both economic and strategic sense to pursue on behalf of customers, investors and shareholders.”
Current Analysis analyst, Counse Broders, said market-watchers expected Sprint to exit the Web hosting market, which has been shrinking for the past two years.
Numerous companies provide Web hosting, and Sprint had trouble offering services to the biggest enterprises while small and medium-size businesses took their Web hosting business to smaller providers, Broders said. IBM and AT&T are still doing fairly well in Web hosting, however.
Some Web hosting companies have been able to consolidate operations because of the advent of blade servers that take up much less space than traditional server cabinets, Broders said.