Earthlink 2014 Annual Report Download - page 38

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Table of Contents
Business Strategy
Our business strategy is to be a leading managed network, security and cloud services provider for multi-
location retail and service businesses.
We believe there is a market opportunity for managed services due to the changing technological and business landscape, which is experiencing
increased demand for data. Evolving security threats, changing regulatory standards, increased use of outsourcing and tightening budgets are also
contributing to businesses' needs for managed services. We are positioning our company to focus on this opportunity. The key elements of our
business strategy and transformation are as follows:
Challenges and Risks
The primary challenges we face in executing on our business strategy are growing revenues from our growth products and services; reducing
churn in our existing customer base; responding to competition from other providers; aligning costs with trends in our revenues; and ensuring
adequate resources to invest in growth. To address these challenges we are taking the following actions:
Trends in our Business
Our financial results are impacted by several significant trends, which are described below.
33
•
Align our organization and operating model around four customer categories.
We are in the process of aligning our organization
around four distinct customer categories, which are consumer, small business, mid-
market/enterprise and wholesale. We believe this
will target our resources and investments into areas that will drive growth and deliver improved performance, enable each business to
compete more successfully in the market and provide strategic optionality. We are currently making various organization changes and
implementing value-optimizing strategies for each customer category.
• Optimize our cost structure and cash flows.
We are focused on optimizing the cost structure of our business and maximizing the cash
flows generated from our business through a lower and more variable cost structure, including reducing the cost structure for our
traditional voice and data products provided to small businesses. This includes managing our cost of revenues and operating expenses,
streamlining our internal processes and aligning our workforce to current revenue trends.
•
Invest in growth business products, marketing and sales.
Our growth business products are MultiProtocol Label Switching ("MPLS"),
hosted voice and managed services (Managed IP VPN, Managed Network, Managed Security and Managed Cloud, among others). We
are focused on investing in products, marketing and sales to support these growth products. We are simplifying and rationalizing our
suite of products to focus on products that are strategically aligned with being a managed network services provider.
•
Evaluate potential strategic transactions.
We continue to evaluate our business, which could lead us to discontinue or divest non-
strategic products, assets or customers based on management's assessment of their strategic value to our business. In addition, we
continue to evaluate potential strategic transactions in order to accelerate our transformation. We believe that targeted corporate
acquisitions, when available at the right economics, can be an effective means for growth and targeted capability building.
•
Implementing a business and operating model around customer categories to optimize operations
•
Simplifying and rationalizing our product portfolio to focus our investments in growth products such as MPLS, hosted voice and
managed services
• Targeting larger multi-
location retail and service businesses which have a lower churn profiles, as well as a need for our product and
services
• Focusing on re-
term efforts, retention offers and targeted price increases
•
Implementing cost efficiencies, such as network grooming and workforce alignment, and seeking to make costs more variable
•
Managing our investment in cloud and IT services and in data centers to invest in services that are most relevant to managed network
services
• Considering the divestiture of non-
strategic products, assets or customers in order to further simplify our operations and use the
proceeds of divestiture transactions to reduce debt and free up cash for other strategic needs
•
Industry factors
. The communications industry is characterized by intense competition, industry consolidation resulting in larger
competitors and fewer suppliers, an evolving regulatory environment, changing technology and changes in customer needs. We expect
these trends to continue. More recently, trends in the industry have included increased demand for data, evolving security threats, the
adoption of cloud computing and the increased use of outsourcing.