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Slumping Paradyne reduces managersBy MICHAEL BRAGA © St. Petersburg Times, published January 4, 2001 LARGO -- Struggling Paradyne Networks Inc. has cut about 20 upper-level management jobs in the face of gloomy earnings prospects for the year ahead. The moves are part of new chief executive Sean Belanger's efforts to restructure the company since he took over the top job from Andy May last month. "It became apparent that some of the positions in the organization no longer made sense in the new structure," Paradyne spokesman Frank Wiener said. The employees who lost their jobs ranged from individual managers to a "handful" of vice president positions. Wiener declined to provide more specifics. The news of the cuts is the latest in a string of bleak pronouncements from the company, which makes equipment used to provide high-speed Internet access over copper telephone wires. In September, Paradyne said third-quarter revenue and earnings would fall far short of expectations. It later reduced its estimates for the fourth quarter and for all of 2001 as well. As a result, the company's stock plunged 91 percent, from around $22 at the beginning of September to $1.94 Tuesday. It closed Wednesday at $2.31, up 38 cents. Paradyne's problems stem from investors losing interest in companies that compete with the Baby Bells to provide telecommunications and Internet services. Lacking capital, these companies have had to reduce their equipment purchases from manufacturers such as Paradyne. Telecommunications companies offering digital subscriber line service have been especially hard hit due to problems and costs associated with the rollout of this high-speed Internet service. On Wednesday, Paradyne's stock was downgraded by Robertson Stephens analyst Paul Johnson, mainly because the company is one the major suppliers of DSL equipment. "Despite our bullish outlook on the overall market for DSL," Johnson said in a written statement, "it is clear to us that the market is more volatile than we had ever suspected." At the same time, three of Paradyne's largest customers, which collectively accounted for 51 percent of Paradyne's $195.8-million in revenues in the first nine months of 2000, have deep troubles of their own. Lucent Technologies, Paradyne's largest customer, said it would miss fourth-quarter earnings expectations by more than 25 cents in the current quarter and would have to cut costs by $1-billion in the year ahead. Rhythms NetConnections, Paradyne's second-largest customer, has had its stock hammered due to investors' pessimism about the prospects for DSL. And Dreamline, a Korean telecommunications and Internet service provider, has canceled millions of dollars worth of equipment purchases from Paradyne as it shifts its strategic focus. As a result of its customers' problems, Paradyne has seen its own cash supplies dwindle. It had $26.6-million as of Sept. 30, down from $62.9-million at the beginning of 2000. In its most recent quarterly report, Paradyne reported that its remaining cash combined with an unused $30-million line of credit from Bank of America should be enough to carry it through the rest of the year. But Paradyne's line of credit expires at the end of the year, which means it will either have to extend the agreement or come up with additional funding. "If we are unable to renegotiate or extend the existing line of credit," the company states, "we believe there are other financing sources available to us." In other news, Paradyne reported Wednesday it added two executives to its management ranks. John Koehler, the former chief executive of Clearwater-based TechForce Corp., has signed on as Paradyne's senior vice president of North American field operations, while Anita George has joined as vice president of international marketing.
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From the Times Business report
From the AP
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