Sprint to wind down Web-hosting business

Amy Shafer

Wednesday, June 11, 2003 | 11:22 a.m.

KANSAS CITY, Mo. -- Sprint Corp. announced Tuesday that it will eliminate its Web-hosting business, resulting in the loss of about 500 jobs at the telecommunications giant.

Sprint plans to phase out operations at eight Web-hosting centers after customers have switched to other providers.

The centers are in Atlanta, Boston, Dallas, Denver, Los Angeles, New York City, Sacramento, Calif., and Santa Clara, Calif. Two Sprint Web-hosting centers in the Kansas City area and Reston, Va., will become corporate data centers that also support other Sprint network capabilities.

Sprint said about 500 employees will lose their jobs, most of them by the end of the year.

Sprint will continue to offer Web hosting through third-party providers, company spokesman Nicholas Sweers said.

The Overland Park, Kan.-based company said it doesn't make economic sense for it to continue to operate the Web-hosting business. For every $1 that business made Sprint, the company lost $3 in expenses, Sweers said.

Sprint said Web hosting contributed about $60 million in revenue for the year ending March 31.

Several new executives, including CEO Gary Forsee, were appointed at Sprint this year after longtime CEO William T. Esrey and president and chief operating officer Ronald T. LeMay left the company over questionable tax shelters.

Industry analyst Jeff Kagan said the move would help Sprint cut costs and focus on its core business.

Sprint said ending the Web hosting business would result in pretax charges of $400 million to $475 million. Sprint FON, which is the tracking stock for the company's wireline business, is expected to take a per-share charge of 20 cents against second-quarter earnings to wind down Web hosting.

During the second quarter, Sprint also expects to take pretax charges of about $36 million, or about 1 cent per share for both FON and PCS, related to separation agreements for Esrey, LeMay and J. Richard Devlin, the company's general counsel since 1987, who left the company in April.

The announcement was made after the market closed Tuesday.

Shares of Sprint FON were up 28 cents to close at $13.87 in trading on the New York Stock Exchange. PCS shares were up 24 cents to close at $5.41. Sprint is the main phone company in Las Vegas.