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Internet Firm PSINet Narrows Business, Lays Off 85

May 10, 1996

NEW YORK (AP) _ Underscoring the pressure from big-name companies like AT&T on the Internet business, access provider PSINet Inc. said Friday it will narrow its focus to experienced computer users rather than the mass market.

In doing so, the company eliminated 85 jobs, about 15 percent of its workforce. Many of the cuts were at the Pipeline Network, a New York-based Internet service it acquired in February 1995.

The company said it was no longer feasible to target consumers who are virtually unfamiliar with the global data network _ and who often need costly technical support.

``We’re going to no longer serve the low-end consumer,″ chief executive William Schrader said, referring to people who are just starting to use the Internet. ``We were not making money at that part anyway.″

The launch two months ago of AT&T’s WorldNet service, which is free to people who log on less than five hours a month, sparked the change.

``If AT&T gives away training to 80 million customers, we’ll take their graduates,″ Schrader said. ``I can make a billion-dollar company on their crumbs.″

PSINet will stop advertising Pipeline in mass market publications. It will revamp the service, with new pricing and access software, by this summer, Schrader said.

``It is a good move to cede to AT&T what is theirs, which is those new users who are going to identify with the AT&T brand,″ said Adam Schoenfeld, analyst at Jupiter Communications in New York.

But the Internet access business has long been distinguished by small companies. Only a few, like PSINet, Netcom On-Line Communications Services Inc. and UUNet Technologies Co., have grown to more than 100,000 subscribers.

PSINet claims more than 8,200 corporate customers and 120,000 individuals nationwide. Many of its individual subscribers are concentrated in New York, where Pipeline grew.

``The biggest problem PSI has had is figuring out what their market is,″ said Nate Zelnick, a New York-based Internet analyst and columnist. ``They’ve realized they can’t be all things to all people.″

The company’s stock has been subject to great swings as perceptions changed about Internet usage. PSINet became publicly-traded a year ago and its stock reached a high in the $25 range in November amid a frenzy of investor interest in the Internet.

It fell sharply in late February when AT&T announced its Internet service. Last week, it rose from $12 to around $18 on buyout speculation after UUNet was purchased by MFS Communications Co. for $2 billion.

PSINet stock closed up 56 1/4 cents to $16.18 3/4 on the Nasdaq Stock Market Friday.

PSINet, formerly known as Performance Systems International, got its start running a computer network for bank automated teller machines and other businesses.

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