Sprint will lay off about 500 workers as it winds down
its web hosting operations nationwide.
The move follows Cable and Wireless' (C&W) announcement on 4
June that it would abandon the US web hosting and services market,
slashing 1,500 jobs in the process. C&W said it was losing
about $1m (£600,000) a day in the US market.
Sprint said it would transfer current hosting customers to
preferred third-party providers or partners and will no longer
pursue direct sales of hosting to enterprise business
customers.
Sprint's Global Markets Group will instead focus more on selling
IP-related products and services that are part of hosting, such as
managed services and network transport on its IP backbone.
Hosting activities contributed about $60m (£35.9m) in revenue
for the 12 months that ended 31 March, but the costs associated
with offering services were much higher, Sprint said.
Pretax charges for the move could run as high as $475m (£284m),
including $300m (£179m) related to the cost of hosting assets and
as much as $175m (£105m) for customer migration, employee
termination and the termination of leases.
"Sprint's priorities have clearly been articulated and include
growing top-line revenue and protecting and improving the company's
bottom line," said Howard Janzen, president of Sprint's Global
Markets Group.
"Those priorities require us to constantly monitor and review
which areas make both economic and strategic sense to pursue on
behalf of customers, investors and shareholders."
Counse Broders, an analyst at Current Analysis, said
market-watchers expected Sprint to exit the web hosting market,
which has been shrinking for the past two years.
A number companies provide web hosting, and Sprint had trouble
offering services to the biggest enterprises while small and
medium-sized businesses took their web hosting business to smaller
providers, Broders said.
Some web hosting companies have been able to consolidate
operations because of the advent of blade servers that take up much
less space than traditional server cabinets, Broders said.
Matt Hamblen writes for Computerworld