Earthlink 2007 Annual Report Download - page 32

third parties, which is costly to defend and could limit our ability to use certain technologies in the future; (17) that we could face substantial
liabilities if we are unable to successfully defend against legal actions; (18) that our business depends on the continued development of effective
business support systems, processes and personnel; (19) that we may be unable to hire and retain sufficient qualified personnel, and the loss of
any of our key executive officers could adversely affect us; (20) that our VoIP business exposes us to certain risks that could cause us to lose
customers, expose us to significant liability or otherwise harm our business; (21) that we may not be able to sell our municipal wireless wireless
broadband assets and that we may incur additional losses related to these operations; (22) that we may not realize the benefits we sought from
our investments in the HELIO joint venture; (23) that the use of our net operating losses and certain other tax attributes could be limited in the
future; (24) that our stock price has been volatile historically and may continue to be volatile; (25) that our indebtedness could adversely affect
our financial health and limit our ability to react to changes in our industry; (26) that the convertible notes hedge and warrant transactions may
affect the value of our common stock; and (27) that provisions of our second restated certificate of incorporation, amended and restated bylaws
and other elements of our capital structure could limit our share price and delay a change of management.
Overview
EarthLink, Inc. is an Internet service provider, or ISP, providing nationwide Internet access and related value-added services to individual
and business customers. Our primary service offerings include dial-up Internet access, high-speed Internet access, voice services and web
hosting services. We also provide value-added services, such as search, advertising and ancillary services sold as add-on features to our Internet
access services. In addition, through our wholly-owned subsidiary, New Edge Networks, we provide secure multi-site managed data networks
and dedicated Internet access for businesses and communications carriers.
We operate two reportable segments, Consumer Services and Business Services. Our Consumer Services segment provides Internet access
and related value-added services to individual customers. These services include dial-up and high-speed Internet access and voice services,
among others. Our Business Services segment provides Internet access and related value-added services to businesses and communications
carriers. These services include managed data networks, dedicated Internet access and web hosting, among others.
Our results of operations include the following items related to changes in our business strategy implemented during the year ended
December 31, 2007:
• Facility Exit and Restructuring Costs. In August 2007, we adopted a restructuring plan (the "2007 Plan") intended to reduce
costs and improve the efficiency of our operations. The 2007 Plan was the result of a comprehensive review of operations within
and across our functions and businesses. Under the 2007 Plan, we reduced our workforce by approximately 900 employees,
consolidated our office facilities in Atlanta, Georgia and Pasadena, California and closed office facilities in Orlando, Florida;
Knoxville, Tennessee; Harrisburg, Pennsylvania and San Francisco, California. The Plan was primarily implemented during the
latter half of 2007 and is expected to be completed during the first half of 2008.
• Discontinued Operations. In November 2007, our Board of Directors authorized management to pursue strategic alternatives for
our municipal wireless broadband operations, including the sale of the assets. Management concluded that our municipal wireless
broadband operations were no longer consistent with our strategic direction. As a result of that decision, we classified the
municipal wireless broadband assets as held for sale and presented the municipal wireless broadband results of operations as
discontinued operations for all periods presented.
• HELIO. During 2007, we decided to discontinue further investments in HELIO, our joint venture with SK Telecom Co., Ltd.
("SK Telecom"). We amended and restated the joint venture agreements
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