Cable & Wireless Plc is parting company with chief executive Graham Wallace, a man held responsible by angry investors for bringing the company to its knees by burning its cash pile on a series of internet acquisitions that have left it nursing huge losses.

The company said yesterday that Wallace would continue to be responsible for day-to-day operations while directors hunt for a replacement. A severance package that could be worth up to 1.5m pounds ($2.4m) is under negotiation.

Wallace, who became chief executive in February 1999 after his predecessor Richard Brown was lured away as the CEO of EDS Corp, was doomed from the moment that outsider Richard Lapthorne was appointed chairman earlier this month. C&W had planned to replace retiring chairman Ralph Robins with existing director David Nash, but investors rebelled at the choice of a director who had backed Wallace's strategy and insisted on a fresh face.

In a further cull of old hands, executive director Don Reed and board member Raymond Seitz will quit at the end of this month to be replaced by two outsiders. Ironically, Wallace's last role will be to ensure the achievement of planned cost-reduction targets, closing down much of the empire he helped to create.

This will involve cutting 3,500 of the 12,500-strong global workforce, and cutting the number of its worldwide data centers from 42 to 23. This is designed to enable the global operation to become free cash flow-positive by March 2004, but many analysts regard this as optimistic and foresee a further round of cost-cuts.

The problem now facing the company is how to find a way forward. The one successful part of the company is its remaining traditional carrier business in the Caribbean but this is threatened by the end of C&W's monopoly, which has already seen competitors bite huge chunks out of its market share.

While ditching unprofitable small-scale customers will stem losses, C&W will find that the multinational companies that are now its focus are equally attractive to competitors flooding upmarket in a bid to escape from the effects of over-capacity in the industry.