New Edge Drops Wholesale

January 18, 2010

New Edge Networks, an EarthLink company, cut their wholesale division this month. While volumes were good, especially with wholesale clients like Verizon, the margins were too thin for the NEN corporate strategy. That strategy would be to milk as much money as possible while this company remains afloat.

The new strategy is to double down on retail. Hire more channel managers and more direct sales people, so they can compete with each other on DSL sales. If you think I sound sarcastic, it's because even that strategy doesn't make much sense.

The stock (NASDAQ:ELNK) is doing well riding a high of over $8. But EarthLink's revenues are down. At the end of October, it reported a year over year revenue drop of 24%. Luckily, operating expenses dropped right along with the revenue.

"The company's total customer base fell from over three million at the end of September 2008 to 2.3 million a year later. Of these, 832,000 retail customers were contracted to broadband services at the end of Q309, down from 845,000 three months earlier." [Telegeography]

2 Comments

Greg Griffiths | January 25, 2010 1:05 PM

Hey Peter! We have not dropped wholesale. We announced a new MPLS NNI product last month. We are concentrating resources to focus on large carriers and regional CLEC's that want to expand their MPLS offering to include DSL access. On the retail side, we have expanded the sales force with in-region Account Executives to take advantage of the increased demand for our MPLS offering. Give me a call or send me a note if you want additional information.

Peter | January 25, 2010 2:06 PM

So New Edge Networks did not lay off Wholesale sales people?

Obviously, NEN isn't severing any contracts with current clients nor closing the door on relationships with CLEC's that they have been working on, but I suspect that there were layoffs.