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With No Capital in Sight, Flashcom Lays Off 23% of Staff


With hopes dimming for a needed round of financing, Flashcom Inc. said Wednesday that it has laid off 120 employees, or 23% of the work force, at the Huntington Beach provider of digital subscriber line service.

The layoffs Nov. 17 were evenly distributed among Flashcom's facilities in Huntington Beach, Irvine and Boston, leaving the high-speed Internet access company with 400 employees, Chief Executive Richard Rasmus said.

"In light of the complete lack of access to capital markets, we decided that we really needed to cut our costs and focus on profitability as opposed to growth," Rasmus said.

"Our challenge is that the standard for the mass market has become free installation and free equipment. That costs us hundreds of dollars for every customer we put on."

The company has shifted its emphasis, he said, from signing up new residential customers to attracting more profitable small and medium-size business users and corporations. But Rasmus said the company will make sure current customers have "continuity of service."

According to public documents, the company had 31,000 customers in early May. Rasmus declined to provide a current customer count.

The company had an ambitious start. Flashcom received $84.15 million in venture capital last spring and filed papers with the U.S. Securities and Exchange Commission to initiate plans to go public. Now those plans are on hold.

"We knew we needed to raise a third round [of financing] by the end of the year to continue on our trajectory. That doesn't seem likely," Rasmus said. "The whole Internet economy and the DSL industry are just underwater now."

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