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Windstream CEO on Losses: We Are Taking the Necessary Actions

Everyone’s agog this week at Windstream’s fourth-quarter and full-year losses; amid that news, some comments from the earnings call seem to have gone overlooked, comments that the company’s channel partners will want to know.

First, Windstream did lose $77.5 million in 2014’s final quarter and $39.5 million for the year overall. That compared to a profit of $118 million in the year-earlier quarter and $241 million for 2013. Windstream blamed the 2014 losses on pension charges. Revenue and sales also were down, from $1.5 billion to $1.4 billion, in the fourth quarter; for 2014 as a whole, the numbers came to $5.8 billion, compared to $6 billion for 2013.

“Overall 2014 results fell short of our expectations, and we are taking the necessary actions to put us on the path for success,” new CEO Tony Thomas said in a prepared statement. “We will make significant progress this year on our goals. We have to do many things faster and better, and we will.”

Thomas did not say how or when Windstream intends to do all of that.

Meantime, here are some tidbits from the earnings call that should prove of interest to agents, VARs and MSPs:

  • Revenue from data and integrated services grew by 4 percent in the fourth quarter, driven by demand for IP and next-gen data services;
  • Data center and managed services revenue increased 21 percent year-over-year to $34 million;
  • Enterprise and SMB revenue fell below expectations, down 2.6 percent;
  • CLEC SMB opportunities remain “challenging,” said Bob Gunderman, Windstream CFO and treasurer, according to a transcript from Seeking Alpha. Here’s the important part: “Given the less profitable CLEC SMB opportunities, we are placing less emphasis on sales distribution on these markets, and we’ll focus on strategies to maximize the cash flows. As a result, we expect revenue from CLEC SMB to continue to decline at double-digit rates in 2015.” Windstream’s CLEC SMB business comes from acquired companies including NuVox and PAETEC, which were heavily channel-centric. What might this mean for channel partners in 2015?
  • On the flip side, enterprise revenue grew, but in the low single-digits. “We saw margin pressure in enterprise related to pricing renewals and lower margins on new sales, and are taking several actions to drive improvements,” Gunderman said. That’s happening in operations, where he said Windstream is giving sales people incentives for new sales and renewals, and putting money into simplifying IT systems and processes. To the latter point, Thomas said on this week’s earnings call that the PAETEC component of the “One Windstream” initiative, which aims to bring together disparate acquired companies’ systems, should be complete in May. Windstream bought PAETEC in 2011.
  • The approximately $4 billion REIT spinoff remains on track.
  • Windstream expects better revenue this year from its enterprise and SMB divisions, among others, but said service revenue could stay flat or decline by up to 4 percent compared to 2014.

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