While it continues to retreat from its original mission as a maker of fiber-optic equipment, Corvis Corp. will lay off 200 employees by the end of the year to save $30 million to $40 million annually, the Columbia company announced yesterday.
A majority of the jobs being cut will be in the company's equipment business in Columbia, bringing Corvis' staff there to about 169.
Corvis has another 1,050 employees at Broadwing Communications Services, a Texas fiber-optic subsidiary that carries voice, video and Internet traffic on its U.S. network. Corvis purchased Broadwing in June for $91 million.
This is the eighth round of job cuts in the past 3 1/2 years for Corvis, which before tech stocks swooned was heralded as ushering in a business transformation in Howard County centered on fiber optics.
The company continues to shift its focus from manufacturing fiber-optic equipment to being more service oriented. At the height of the tech boom in August 2000, Corvis had about 1,600 employees and its stock traded as high as $108.06.
But as the telecommunications industry became battered by a glut of capacity, Corvis stock plummeted. Corvis leaders said continued efforts to restructure will allow the company to become profitable for the first time next year.
On Monday, Corvis stock began trading again on the Nasdaq national market because it has been trading above $1 per share since May. Last October, Corvis stock was moved to the small cap market because it failed to meet the $1-per-share minimum listing requirement. The company had at least 180 days to regain its listing on the national market.
Over the past few years, Corvis has significantly reduced its spending on research and development for new equipment.
In June, Corvis and Cequel III, a St. Louis investment firm, formed a joint venture to buy Broadwing's assets, including about 19,000 miles of fiber optic network cables with switches, amplifiers and a network operations center in Austin. Corvis owns a majority of Broadwing.
"While these steps are never easy, they are necessary for the long-term success of the company," David R. Huber, chairman and chief executive officer, said of the restructuring.
"This was a long-awaited positive development," Hasan Imam, a senior equity research analyst at Thomas Weisel Partners in New York, said of the jobs cuts and restructuring.
"The Broadwing business is now the bulk of the business bringing in about $575 million in revenue. In comparison, the equipment side of the business is bringing in about $4 million to $5 million in revenue a year. It's a good move.
"Most of the development work has been done on the product that they have, so it's commercially viable," Imam said. "All they need are engineers who can support the product in the field and to add incremental features over the years. I don't think the game is over for the equipment business. Corvis is just reducing that operating model rather than carrying on a bloated structure."
Corvis said it expects to reduce operational expenses by about $7 million to $10 million per quarter. It also expects to end 2003 with $275 million to $300 million in cash, cash equivalents and short-term investments.
"We will continue to look for ways to grow the business and strengthen what is one of the strongest balance sheets in the industry," said Lynn D. Anderson, Corvis' chief financial officer and treasurer.
Corvis expects to take restructuring charges associated with the work force reduction in both the third and fourth quarters of this year, but provided no additional details.
The company said it would discuss additional details of the business restructuring during its third quarter earnings conference call Oct. 30.
Shares of Corvis rose 7 cents yesterday to close at $1.52.