Metro Shake-out: Chicago Cancels Wi-Fi, EarthLink Lay Offs, Kite Networks Deal Goes South(west), SkyPilot Layoffs Alleged

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Metro Shake-out: Chicago Cancels Wi-Fi, EarthLink Lay Offs, Kite Networks Deal Goes South(west), SkyPilot Layoffs Alleged
By Glenn Fleishman


It’s a big day in the future of metro-scale networking: It’s not a crash, but it’s a big readjustment.

Chicago cancels Wi-Fi plans: After months of negotiation with bidders AT&T and EarthLink—those are separate, not joint bidders—Chicago decided to cancel its Wi-Fi plans, the Chicago Tribune reports. The city and firms couldn’t come to terms. The Tribune says the city wouldn’t offer any anchor tenancy commitment; AT&T and EarthLink required that. I can see the meetings. “Free.” “No.” “Unencumbered?” “No.” “No cost?” “No.” And so on. Chicago will re-evaluate how it goes forward. AT&T meanwhile now charges $20 per month for 1.5 Mbps ADSL, as well as their merger-required $10 per month/768 Kbps offering. (Ten percent of Chicago residents can’t get DSL, but the cable penetration for that 10 percent isn’t noted.)

EarthLink lays off 900, municipal division head out: Donald Berryman, head of the company’s Municipal Networks division is out—his “employment with the Company is terminating,” reads the SEC filing (PDF)—and the position he occupied as an executive VP and president of the division is also gone. 899 of his colleagues at the company are also being laid off. It’s unclear how many others, if any, come from the municipal division, but I can’t imagine they’ll shed the head and that many other employees without some attrition there. The municipal group outsources construction; I don’t know it’s current size.

EarthLink expects to save $25m to $35m through 2007, although they’ll have one-time charges of $60m to $70m. Savings should exceeds those costs within six months. One city in which they will “substantially reduce [their] presence” is Atlanta, where they’re headquartered. Companies that change CEOs sometimes change their HQ cities, too.

Useful to note that the new CEO gets a variety of stock incentives, including 700,000 options that vest Sept. 30 of this year, and 800,000 vesting starting Dec. 31, 2008. He was also awarded restricted stock that doesn’t vest until starting June 25, 2009. Now, I thought giving executive the desire to make short-term gains was something of the past? Huff could pocket $7m for a $10 stock gain from options over a few months based on strong moves that may have poor long-term revenue consequences (or good ones). The other incentives are longer-term, but he doesn’t have to stick around for those. The down side for him is that he did purchase 100,000 shares with his own pennies and dollars (about $750K), so should his efforts fail, he’s underwater on EarthLink options and stock as well as out of pocket. Huff just hired a crony, too; the new COO, Joseph Wetzel, was the president of operations at Huff’s previous employer.

Speaking of Atlanta, what’s the status of its Earthlink-winning Wi-Fi network?

Kite Networks deal goes south: In July, MobilePro sold its Kite Networks division, that runs Wi-Fi networks in the Southwest, and other forms of broadband wireless networks elsewhere—including some under the Sprint name—to Gobility. The deal was for future stock (convertible debentures), and required Gobility to raise $3m in financing by mid-August. An SEC filing from MobilePro states that Gobility failed to raise the funds and let some vendor payments for Kite Networks go slack. MobilePro says it may sue based on alleged misrepresentations from Gobility. Given how little money was involved in the Kite deal, it’s unclear how much more MobilePro is willing to invest in its ventures. They provide Wi-Fi service in Tempe and part of Chandler, Ariz. Update on Wednesday: Kite sent out a press release (not available online) in which Gobility’s head says that they’re still operating the networks and working on funding.

Unstrung reports based on one source that SkyPilot has allegedly slashed half its staff: The company wouldn’t respond to a query from Unstrung about what they told that outlet were “rumors.” Unstrung says their source said half the company’s 80 employees were let go, mostly in sales and marketing, and the company is looking for a buyer. SkyPilot provides equipment for MetroFi’s metro-scale installations. I have been wondering with recent reversals in metro-scale networking fortunes what happens to the equipment makers that rely on large-scale installations such as SkyPilot, Tropos, BelAir, and Strix? The market is still growing despite marquee dropouts, and enterprise sales are typically unreported in this context.

Posted by Glennf at August 28, 2007 11:32 AM