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Managed services provider Digex Inc. will cut about 200 workers — 20 percent of its workforce — in an effort to improve the companys bottom line, according to officials.
The cuts, despite coming as majority owner WorldCom Inc. prepares its bankruptcy plan, are not related to the Clinton, Miss. carriers financial woes, according to Digex CEO George Kerns in Laurel, Md.
“Were trying to manage the business for profitability at the level of business were currently at. I joined the company 16 months ago, when they talked about generating $400 million in revenue. Last year we finished at $215 million. Im more pragmatic than my predecessor,” said Kerns, referring to ousted Digex CEO Mark Shull.
The layoffs will not come from Digexs services delivery organization, and they are expected to be completed by the end of the week, Kerns said. The cuts are part of a larger plan to make Digex financially independent from WorldCom within the next year.
As a managed services provider, Digex typically requires capital outlays upfront in any new customer acquisition to cover the purchase of computing equipment in support of the customers applications.
Kerns said that the MSP is now looking at alternatives, such as leasing equipment or accepting a new customers existing equipment to be certified and managed in the Digex environment.
Digex is also considering expanding the servers it now supports beyond Sun Microsystems Inc.s Solaris servers and Hewlett Packard Co.s Compaq Windows NT/2000 servers. Other servers under consideration include HP-UX and IBM AIX servers, Kerns said.
This latest round of layoffs marks the third time this year that Digex has cut jobs. The firm is down to 850 employees from a high of more than 1,400.
“The workforce reductions this week make sense with the revenue we expect to see and are seeing. We have a business plan that makes us financially independent within a year,” he said.
Despite speculation that Digex is grooming itself to be sold off by WorldCom, Kerns said that no such plans were in place.
“We could be ultimately divested if WorldCom wants to divest its majority interest. Someone could buy that interest. But we are viewed as a core competency by WorldCom,” he said.