NEW YORK (CNNfn) - NorthPoint Communications, the troubled provider of high speed Internet service, announced Thursday it is cutting about a fifth of its staff in a cost-cutting move that comes a week after a deal to sell a 55 percent stake in the company fell through.|
There were 248 jobs cut, equal to about 19 percent of the company's staff. The employees, mostly in its San Francisco and Emeryville, Calif., offices, were notified of their terminations Thursday.
The company -- which provides digital subscriber line, or DSL, service -- pointed to last week's decision by telecom Verizon Communications Inc. of its intention to terminate the company's agreement to buy 55 percent of NorthPoint as the reason for the cuts.
"We believe that Verizon's actions are breaches of its agreements with NorthPoint Communications," said NorthPoint Communications President and CEO Liz Fetter. "However, as a result of Verizon's notice of termination, we must make some difficult decisions. Our senior team is committed to do everything necessary to improve efficiencies and reduce spending."
NorthPoint has vowed to sue Verizon due to the termination of the deal.
Verizon, the nation's largest local phone company, had agreed to invest $450 million in NorthPoint's operations and pay shareholders $350 million, or $2.50 a share, for a 55 percent stake in the company, while letting existing shareholders retain their shares. But on Nov. 29 it said was terminating the deal because of NorthPoint's deteriorating financial, business and operating conditions. Verizon also said it would not arrange for NorthPoint to receive additional financing.
Shares of NorthPoint were trading at $14.25 when the deal with Verizon was announced Aug. 8, and closed at $2 just before Verizon announced it was pulling out of the deal.
Shares of NorthPoint (NPNT: Research, Estimates) were unchanged at 41 cents in trading Thursday, while shares of Verizon (VZ: Research, Estimates) gained 13 cents to $58.88.