In line with its intention to focus expansion efforts on markets with the greatest opportunities, Pacnet will commit more capital and resources to its China business. The Company will work to more fully leverage its existing network and licenses in China, including its domestic IP VPN license.
4) Implement an industry leading operating model that enables superior execution and the delivery of an unrivaled customer experience.
The Company will elevate operating standards and will create industry leading systems and processes that will enable consistent and efficient execution. Pacnet also commits to a new "Customer Culture" philosophy such that all efforts will be geared towards delivering the very best solutions and superior service to customers.
5) Rationalize the business to free capital for more value added services.
Pacnet will fine-tune its strategic focus and streamline the organization in order to strengthen the business for the long-term. To achieve this, the Company will divest certain parts of its business that are no longer considered core and in the fourth quarter it will exit commoditized businesses such as the residential internet service and wholesale voice segments. This will enable the Company to focus exclusively on building out high margin value added services offerings. Moreover, Pacnet will streamline the underlying operations to create an operating model that is customized around the most important offerings. As part of this, the Company will reduce its global workforce in non-strategic areas and by a total of approximately 30%, thereby lowering annual expenses by approximately US$30mm.
The planned transformation initiatives will result in a number of specific benefits to Pacnet's overall business and this will start to take effect immediately and continue over the next three years. Pacnet will be able to better serve its customers, it expects that revenue will grow much faster than previously, and the business will have a leaner cost structure as approximately US$30mm in annual expense will be removed. A portion of the resulting capital resources will be re-invested back into the business to further the many planned initiatives.
The Company and its shareholders are confident that it has ample liquidity to fund all of the capital expenditures related to executing the new strategies without jeopardizing the strength of the balance sheet. Further, many of the planned changes will bolster the Company's cash generation capacity and give Pacnet more financial flexibility. The Company also has the backing of a high quality investor group and strong lines of credit with banking partners.
Pacnet's New Organizational Model and Leadership Team
The New Organizational Model
In support of the planned initiatives, Pacnet has realigned and refined its operating model. The Company is restructuring the sales organization to create two separate divisions -- Enterprise Markets and Carrier Services. This is designed to drive revenue in two primary areas and provide solutions to two very unique sets of customers with specific product, pricing, service, and support needs.
The creation of a dedicated Managed Services Unit will channel investment towards enhancing Pacnet's comprehensive suite of state-of-the-art products and services. A dedicated focus on driving innovation and product development, building on the Company's data center platform, will further differentiate Pacnet from its peers and strengthen its position as a leading gateway into Asia Pacific's digital marketplace.
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