vad Cuts Costs and Reduces Staff by 13 Percent; Steps Taken to Bring
Operational Costs in Line
with Market Demands
Business Editors and High Tech Writers
SANTA CLARA, Calif.--(BUSINESS WIRE)--Nov. 27, 2000--Covad
Communications (NASDAQ: COVD), the leading national broadband services
provider utilizing DSL (Digital Subscriber Line) technology, today
announced it is cutting operating costs and reducing its nationwide
workforce by 13 percent. These actions are expected to provide a
targeted 2001 cost saving of 20 to 30 percent for the company.
The workforce reductions are in various Covad facilities
throughout the US, including major offices in Santa Clara, Calif.;
Denver, Colo.; Manassas, Va. and Atlanta, Ga. The positions impacted
are at all levels of the organization and include operations, sales,
marketing and support functions, affecting close to 400 of Covad's
full time employees.
The cost reductions include office consolidation, contract and
professional fees, facilities, business and marketing expenses,
central office build-out expenditures, equipment, materials and
supplies. Some of these cost reductions have been ongoing as part of a
cost control initiative which started in July 2000.
"Key to our success is a clear path to profitability," said Chuck
McMinn, chairman of Covad. "Getting control of our costs and headcount
is imperative to meet this goal and with continued discipline around
our cost structure, we expect the expense levels of the company will
be significantly reduced for 2001. The reduction activities are
difficult for everyone involved, but these steps are necessary to
bring operational costs in line with current market demands, and allow
us to maintain our position as the premier national broadband DSL
provider."
Specific actions being taken as part of this cost reduction focus
include:
-- Holding expansion of Covad's nationwide network to just over
2000 central offices, which provide national coverage for
approximately 45 to 50 percent of homes and businesses in the
US
-- Relying almost exclusively on Covad's roll out of line sharing
for consumer orders received after January 1, 2001
-- Canceling the build out of Covad's third operations facility
in Alpharetta, Ga.
These steps are possible because of increased productivity in
operations and back office systems. In particular, the expected
benefits of implementing the FCC's year-old line sharing mandate in
Covad's network, and soon offering a self installation option, should
eliminate many truck rolls and allow the company the opportunity to
significantly reduce its costs.
Covad has also halted construction of its planned Alpharetta
operating facility and will close it in the next 60 days. It will
restructure other operating facilities in Manassas, Denver and Santa
Clara, transferring Alpharetta work, currently being handled in
Covad's Atlanta office, and re-deploying approximately 10 percent of
Atlanta employees to these locations. The current Atlanta office will
continue operations with approximately 75 sales, sales support and
operations support positions.
Most employees affected by the reduction will be informed starting
today. Covad is providing career services and counseling through its
Employee Assistance Program, along with severance arrangements and
benefits continuation.
In conjunction with this restructuring of the business, Covad
expects to report a one-time charge in its fourth quarter ending
December 31, 2000 to cover the costs of severance arrangements and
cost reduction actions.
"The core operating competencies of our company have not changed
and the demand for DSL is still tremendous," said McMinn. "We provide
unparalleled national DSL broadband services for businesses and homes,
we serve more customers than any other company in our class, our
customer service, operational support services and installation
practices are unrivaled, and our distribution channels are rapidly
being expanded. Covad remains the industry leader."
On Tuesday, December 12 at 5:30 am Pacific Standard Time, Covad
will be hosting a conference call to discuss the business outlook
going forward. To access the conference call, dial (212) 346-0159 (no
password is required). The replay number for the call is (800)
633-8284, pass code No. 17059948. The replay will be available through
Friday, December 22.
About Covad Communications
Covad is the leading national broadband service provider of
high-speed Internet and network access utilizing Digital Subscriber
Line (DSL) technology. It offers DSL, IP and dial-up services through
Internet Service Providers, telecommunications carriers, enterprises,
affinity groups, PC OEMs and ASPs to small and medium-sized businesses
and home users. Covad services are currently available across the
United States in 120 of the top Metropolitan Statistical Areas (MSAs).
Covad's network currently covers more than 47 million homes and
businesses and is targeted to reach approximately 45 to 50 percent of
all US homes and businesses by the end of 2000. Corporate headquarters
is located at 4250 Burton Drive, Santa Clara, CA 95054. Telephone:
1-888-GO-COVAD. Web Site: www.covad.com.
Safe Harbor Statement under the Private Securities Litigation Reform
Act of 1995
The statements contained in this press release that are not
historical facts are "forward-looking statements," including
statements concerning the Company's plans to expand its network,
market opportunities, the cost, timing and scope of the deployment of
the Company's network and launching of its services, implementation of
line sharing and self-installation, anticipated capital expenditures,
expense reductions and other operating results, success of strategic
relationships, and the statements made by the chairman in this
release. Actual events or results may differ materially as a result of
risks facing the Company or actual results differing from the
assumptions underlying such statements. Such risks and assumptions
include, but are not limited to, the Company's ability to successfully
market its services to current and new customers, the consolidation of
sales to a fewer number of wholesale customers, the Company's ability
to generate customer demand, to achieve acceptable pricing, to respond
to increasing competition, to manage growth, to receive timely payment
from our Internet service providers and other customers, to access
regions and negotiate suitable interconnection agreements, all in a
timely manner, at reasonable costs and on satisfactory terms and
conditions, as well as regulatory, legislative, and judicial
developments. All forward-looking statements are expressly qualified
in their entirety by the "Risk Factors" and other cautionary
statements included in the Company's SEC filings.
--30--ac/sf*
CONTACT: Covad Communications
Martha Sessums, 408/844-7508 (Press)
msessums@covad.com
Allyson Willoughby, 408/855-7299
awilloug@covad.com
or
Nick Kormeluk, 408/844-7457 (Investor)
InvestorRelations@covad.com
or
Covad Atlanta
Suluh Lukoskie, Cell: 408/242-2090
KEYWORD: CALIFORNIA
INDUSTRY KEYWORD: INTERNET TELECOMMUNICATIONS
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Nov-27-2000 21:06 GMT
Symbols:
US;COVD
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