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Windstream Layoffs 2017: Targeted Staff Cuts at Network Service Provider

Windstream Holdings has had targeted layoffs in New York and Arkansas, according to two separate local reports, as the network service provider strives to march forward following the EarthLink and Broadview Networks acquisitions over the past year.

Roughly two dozen people were cut recently in various parts of the company in Rochester, New York, according to WXXI News, a local media station. And in Arkansas, 21 positions were cut, according to Arkansas Business.

Admittedly, those are relatively small figures compared to the company's overall staffing of roughly 13,000 employees, according to the reports.

While Windstream continues to invest in strategic growth areas of the business, it has to be disciplined about its overall cost structure and that forces it to have to sometimes make tough decisions about employees, a company representative told the station.

ChannelE2E has not independently confirmed the cuts or whether the company made additional headcount changes elsewhere.

Windstream Acquisitions: Hits or Misses?

Windstream has made two key acquisitions over the past year.

First up, Windstream and EarthLink announced a $1.1 billion merger in November 2016. At the time, many observers believed the deal could unlock some cost synergies. But there also were some key growth opportunities -- such as promoting EarthLink’s SD-WAN services to Windstream’s enterprise customers.

Windstream followed up in April  2017, acquiring Broadview Networks for $227.5 million in cash. That deal's valuation, at less than 5 times annual EBITDA, according to ChannelE2E calculations, looked cost-efficient.

April 2017: Windstream Partner Program

Olen Scott
Olen Scott

By April 2017, Windstream said it was enhancing the company's partner program -- particularly with SD-WAN services for partners. Key improvements, the company indicated at the time, included:

  • adding dedicated Sales Engineering, Sales Support/Sales Order Coordination and Account Management to the Indirect Channel;
  • dedicated sales engineering team members located across the company’s service areas; and
  • a consolidated Service Order Coordinator and Channel Advocate programs that ensure more focused and responsive sales-support functions, including quoting, partner support and order entry/processing.

“The past year has brought a number of positive changes for Windstream channel partners, and 2017 will bring a greater level of focus and commitment to giving them the tools and dedicated resources they need to be even more successful," VP Olen Scott said at the time."

August 2017: Cost Cutting Updates

WindStream CFO Bob Gunderman

The EarthLink and Broadview deals, along with SD-WAN and unified communications as a service (UCaaS) investments, will allow the company to lower its interconnection costs by approximately 10% annually for the next five years, CFO Robert Gunderman estimated during an August 2017 earnings call.

During that same call, Gunderman described workforce cost changes without specifically mentioning layoffs or staff reductions. He stated: "...we're instituting some workforce changes alongside other cost initiatives to better serve our customers and operate more efficiently. The changes will yield savings of approximately $25 million in 2017 and $55 million annually thereafter, the results of our legacy IT systems integrations and improved operational processes."

Windstream Financial Results So Far

At first glance, Windstream has been in growth mode. For its Q2 2017, total revenues were $1.49 billion and total service revenues were $1.47 billion, up 10 percent respectively year over year. Also, enterprise service revenues were $564 million, up 15 percent increase from the same period a year ago.

But the challenges surface when you take a look at Windstream's adjusted results -- which are based on the combined historical financial information of Windstream and EarthLink and assumes the merger was completed on Jan. 1, 2016.

On an adjust basis, revenues were $1.49 billion in Q2 -- down from $1.61 billion in the corresponding quarter for 2016. Also, enterprise service revenues were $564 million, a decrease of 4 percent from the same period a year ago, according to those adjust results.

Challenging Moment

Warnings signals popped up in August, when those Windstream quarterly results disappointed Wall Street -- and the company shocked investors by eliminating its dividend. Windstream shares fell 27 percent on the news.

The overall decline wasn't isolated to a single day. Over the past year, Windstream shares have fallen from $10.46 to $1.84. The company's next earnings report is expected November 6, 2017.

This story originally covered the New York area cuts. The story was updated Sept. 28, 2017 to reflect the Arkansas cuts.

Joe Panettieri

Joe Panettieri is co-founder & editorial director of MSSP Alert and ChannelE2E, the two leading news & analysis sites for managed service providers in the cybersecurity market.