The wheels are coming off Enrons broadband business.
The company revealed today that it will close its broadband trading offices in London and Singapore over the next six months. Shutting the offices is “a way to structure the business to fit the opportunities that are out there in the market now,” Enron spokeswoman Terrie James told Dow Jones Newswires. The two offices have a total of about 35 employees, some of whom may be offered jobs in Houston. James told Dow Jones that she didnt know how much the company would save by shutting the offices.
James did not immediately return calls from Interactive Week.
The office closings are the latest in a string of retrenchments by the now-wobbly energy giant, which spent an estimated $1 billion on its broadband strategy. Enron Broadband Services, once the highly hyped star of the rapidly growing company, has become an embarrassment. The entity lost $80 million on $4 million in revenue during the third quarter. Those results followed a loss of $102 million during the second quarter on revenue of $16 million.
Last month, the Houston company announced that the broadband business, which had been a stand-alone entity, was going to be folded into Enron Wholesale Services, the companys massive trading business. The move was perceived as a way to help hide the broadband business faltering results.
But Enrons troubles go far beyond broadband. In the third quarter, the company took a $1 billion charge against earnings to write down investments in broadband, water marketing and other ventures. It also reduced shareholder equity by $1.2 billion. More troublesome, though, are a series of partnership deals between the company and Enron Chief Financial Officer Andrew S. Fastow. The deals are now being investigated by the Securities and Exchange Commission. There is also speculation that some of Fastows dealings in a company called LJM2 may be connected to Enrons broadband business, and that Fastow and other company insiders formed the partnership as a way to hedge the risks Enron faced in getting into broadband.
Trading at nearly $90 per share last year, the stock closed at $15.35 on Friday, Oct. 26. That nosedive has led to a predictable fate: Today, Enron was hit with another class action lawsuit. The suit alleges that the companys officers, who have sold tens of millions shares of stock in recent months, did not fully disclose “material adverse information and misrepresented the truth” about the companys financial condition. About half a dozen suits have been filed against the company since it announced its third-quarter earnings on Oct. 16.