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C&W to axe 3,500 global jobs
LONDON, England -- UK telecoms group Cable & Wireless said on Wednesday it would slash about 3,500 jobs as it retreats from U.S. and continental European markets. C&W said the restructuring at its cash-strapped Global division would cost about £800 million ($1.27 billion) but save £400 million a year. The decision follows a strategic review of the division announced in September. The Global division -- which provides Web site hosting and data services to businesses -- will see its workforce reduced to 9,000 from 12,500 as the group exits domestic-based operations and focuses mainly on multinational companies. C&W said it would also close 19 of its 42 data centres in the U.S. and continental Europe. Meanwhile, operations in the UK and Japan "should be reshaped to reduce costs further and produce greater focus on profitability and cash flow," the company said. The news came as C&W posted first-half earnings before deductions of £172 million, above analysts forecasts. The group said it has written off £2.7 billion in goodwill -- the difference between the acquisition cost and current market value -- at the Global unit and would slash another £787 million from the value of its fixed assets. "We have conducted a comprehensive review of out Global business and considered a number of options," chairman designate David Nash said in a statement. "The scale of the restructuring we are undertaking represents a major challenge, particularly given the current market turmoil." C&W (CW) shares, which already lost more than half their value this year, plunged 23.6 percent to 99.50 pence in early trading on Wednesday in London. The Global division was created by Chief Executive Graham Wallace, who spent $1 billion in the past year buying U.S. Web hosting firms Digital Island and Exodus. At the time, Wallace said the Web hosting market was expected to grow by 45 percent annually. However, the market collapsed when the Internet bubble burst and anticipated demand failed to materialise. Wallace said in a statement on Wednesday that the Global division is still expected to turn a profit by March 2004. "These are tough measures in a tough market, but we are committed to achieving our cash flow target for Cable & Wireless Global," he said.
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