March 13, 2001, 1:43 PM — Broadband services provider Covad Communications Inc. said today it will postpone its fourth-quarter earnings call and its year-end earnings to review accounting issues.
The company also said it was closing 260 central offices rather than the 200 it had previously announced and had suspended applications for 500 more. The company uses the offices to store Digital Subscriber Line (DSL) equipment used by local telephone carriers.
The Santa Clara, Calif.-based company had previously said it would release its 2000 earnings Feb. 27. It now says its earnings release will coincide with the filing of its 10-K annual earnings report with the Securities and Exchange Commission.
Spokeswoman Martha Sessums said the postponement will allow the company more time to review how it has recognized revenue and handled restructuring charges and asset impairment -- how it handles equipment it has purchased but no longer uses. The company said the review of its revenue might affect previously reported results.
Last year, the company laid off 800 employees (see story). In its statement, Covad said its anticipated charge-off due to the layoffs and office closings will be "substantially larger" than the previously announced $20 million.
"This can't be good news," said Lisa Pierce, an analyst at Giga Information Group Inc. in Cambridge, Mass. "I'm sure they're going through their numbers to make sure they accurately reflect their current circumstances. If your numbers don't tell a good story, you have to figure out what kind of a story you want to tell about your future."
Pierce said Covad's future would look brighter if it got a cash infusion from one of its major partners, such as AT&T Corp.
Covad isn't the only struggling DSL services company. In December, San Francisco-based NorthPoint Communications Group said it was withdrawing from a European joint venture as part of a wider cost-cutting effort (see story). In addition, Digital Broadband Communications Inc. in Waltham, Mass., disclosed that it had filed for bankruptcy protection and shut down its network in January. In addition, NorthPoint and several other DSL providers announced layoffs late last year.