Engage Gains on Cost-Cut Moves

Engage, Inc. (Nasdaq: ENGA) picked up 0.06 to 1.19 Thursday after the company, which provides online marketing software and interactive media services, said it will lay off half its employees in a move to cut costs.

Engage said it plans to integrate its businesses and operating units into a "single, cohesive organization," with an increased focus on software. The software division has higher gross margins than the company's other businesses.

The company will consolidate its offices, moving the headquarters of its media division from San Francisco to its Andover, Massachusetts base. The media business will also renegotiate agreements with some of its network Web sites to increase the percentage of revenue retained by the company.

The goal is to break even on a cash earnings basis by the end of fiscal 2001, the company said.

Engage said the job cuts will take place over the next several months, with 550 positions being eliminated through a combination of layoffs and attrition.

The restructuring will save US$120 million to $150 million per year once the plan is in place, the company said. In the meantime, it will result in non-cash restructuring charges of $23 million to $25 million.

The "cash impact" of the restructuring will be $17 million to $20 million, the company added.

"We believe this major restructuring is necessary to enable the company to position itself for future growth and to significantly reduce costs," said president and chief executive officer Tony Nuzzo. "We are creating a fully integrated company with internal dynamics that facilitate more effective communication and decision-making."