EarthLink Pink Slips Half Of Workforce

In a continuing effort to cut costs, EarthLInk said it would lay off about 900 employees.

In addition, it would buy back about $200 million of its own stock, according to a statement by CEO Rolla Huff on Tuesday. The news was well received by Wall Street, as EarthLink stock closed up seven percent even in the face of a sharply lower market overall.

EarthLink would close offices in Orlando, Fla., Knoville, Tenn., Harrisburg, Penn., and San Francisco. It would also downsize at its two main offices located in Atlanta and Pasadena, Calif.

"These changes get our cost structure in line, but there is much more to do," Huff said. "While we recognize this is a difficult time for those affected individuals, this was a needed action for the company to better align our cost structure with our existing business."

About $25 million to $35 million in savings would be realized in this year alone, and it expects to break even with restructuring costs of $60 million to $70 million within the next six months.

Much of the changes could be attributed to what EarthLink sees next year as slowing growth in its ISP business. The company built a massive customer on dial-up customers, but has struggled to maintain that as most consumers now opt for broadband, where it has a significantly smaller and less competitive footprint.

Also up in the air is the future of Helio. The MVNO has been at the center of EarthLink's financial problems as it has not been able to turn a profit. The company could spend as much as $270 million on the offering, but may end up pulling out.

EarthLink's municipal Wi-Fi initiative is also possibly in trouble: a review is underway to decide the feasibility to move forward there.