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June 11, 2003

Network operator Sprint (Quote, Chart) is shuttering its money-losing hosting and co-location business and laying off 500 employees.

The move will result in a second-quarter charge of between $400 million and $475 million, about $300 million of which is for the impairment of hosting assets.

The remainder is related to the closure of eight Sprint facilities (Atlanta, Boston, Dallas, Denver, Los Angeles, New York, Sacramento, Calif., and Santa Clara. Calif.), customer transition to other providers and severance packages.

Sprint facilities in the Kansas City area and Reston, Va., will be converted to corporate data centers that also support other Sprint network capabilities.

After the phase out, which is expected to be complete by year’s end, Sprint’s direct sales force will focus on Internet protcol related offerings such as managed services and network transport on its Tier 1 IP backbone.

“Sprint’s priorities . . .include growing top-line revenue and protecting and improving the company’s bottom line,” said Howard Janzen, president of Sprint’s Global Markets Group. “Those priorities require us constantly to monitor and review which areas make both economic and strategic sense.”

Sprint, based in Overland Park, Kan., is not the first to exit the hosting business. In April, Level 3 Communications said it would dump its hosting business (a holdover from its Genuity acquisition) and send customers to Computer Sciences Corp. CSC also gained data centers in Chantilly, Calif., and Cambridge, Mass., and about 125 employees.

In other Sprint financial news, the company will take $36 million in second-quarter charges for separation packages for William T. Esrey, former chairman and CEO; Ronald T. LeMay, former president and COO; and J. Richard Devlin, former executive vice president and general counsel, external affairs and corporate secretary.

The charges include $15 million of non-cash expense associated with accounting for changes in certain terms of stock options for the former executives.

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