Monday November 27, 4:04 pm Eastern Time
Press Release
Covad Cuts Costs and Reduces Staff by 13 Percent
Steps Taken to Bring Operational Costs in Line with Market Demands
SANTA CLARA, Calif.--(BUSINESS WIRE)--Nov. 27, 2000--Covad Communications (NASDAQ: COVD - news), 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.
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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 |
