Voice and data communications company Convergent Communications Inc. is closing five offices nationwide and cutting 22% of its work force as part of a plan to refocus its efforts on data services. The company said Monday the move will help it break even on earnings before interest, taxes, depreciation, and amortization by the end of 2001, a year earlier than expected.
A Convergent spokeswoman attributed most of the cuts to the sale of the company's voice-integration operations to Inter-Tel Inc. "When you sell off a division, there's some support staff at corporate that's going to go," she says. The cuts also are the first indication that the company has engaged its new business plan. "We're providing services," says the spokesperson, "Instead of just selling [the customer] a piece of equipment and not talking to them again until they need another piece of equipment."
Since coming to Convergent from US West in April, CEO Joe Zell has embarked on an aggressive course of streamlining the company and focusing it on broadband and Web services for small and medium-sized businesses. During his short tenure at the company, Zell has cut more than two-thirds of its work force and slashed expenditures by 60%.
Bill Benton, an analyst with William Blair & Co., says the cuts are clearly part of Zell's efforts to streamline, but it's too early to know whether the new business plan will work. "We've got to see the sales results," he says. "It's a bet on Joe Zell, but it's a bet on a guy who's done it before."