NBCi Cuts 150 Jobs Amid Net Ad Downturn

In a bid to reduce costs and eventually obtain profits, NBC Internet (Nasdaq: NBCI) announced Thursday that it is cutting 150 jobs, or approximately 30 percent of its workforce.

The San Francisco, California-based Internet portal, which is backed by NBC and CNet, also lowered its revenue projections for 2001 from US$150 million to $100 million.

Because of the slump in the Net advertising arena, some analysts say that it is unlikely that NBCi will obtain reach profits anytime soon.

"Talking about profitability is premature," Morningstar.com analyst George Nichols told the E-Commerce Times. "Profits are nowhere near on the horizon, unless what we're seeing in terms of cost reduction is just the tip of the iceberg."

Nonetheless, NBCi repeated the forecast that it expects to become profitable by the fourth quarter of 2001 or the first quarter of 2002, before non-cash charges and NBC promotion costs.

Facing Challenge

"We are determined to reach profitability within the same time frame we reported at the end of the third quarter 2000," said NBCi chief executive officer Will Lansing.

Lansing added: "But to reach this goal, we needed to make difficult decisions on the operational side of our business."

Lansing also said the changes were made to account for the "challenges within the online advertising market."

More details about the layoffs and revenue projections are expected to be released in a few weeks. On February 7th, NBCi is scheduled to report financial results for the fourth quarter and fiscal year ending December 31st.

Deeper Cuts

The layoffs at NBCi this week are the second round of staff cuts announced by the company. In August, the company said that it planned to cut about 20 percent of its 800 person staff by the end of 2000.

NBCi said that the latest round of job cuts would eliminate jobs "within all areas of the company."

In addition to its San Francisco, California headquarters, NBCi has offices in New York City, Los Angeles and Chicago.

Staff layoffs are not the only problems to hit the company. In October, NBCi co-founder and president Edmond Sanctis resigned, along with John McMenamin, the firm's executive vice president of sales and marketing, Greg Regis, senior vice president of sales , and Stacy O'Connell, vice president of marketing .

Future Focus

Although many observers, including Morningstar's Nichols, believe that online advertising is here to stay and that the market will gradually come back, Nichols said that "second tier companies" like NBCi are bound to be hit harder than the first tier companies like America Online and Yahoo!.

The company is also handicapped by what Nichols termed a "not very coherent business model."

Nichols said the company is trying to be all things to all people and that the company would have a better chance of succeeding if it "became more focused."

For an example, Nichols pointed to the Walt Disney Co., which chose to focus its Internet offerings in the entertainment field instead of operating a broad based portal like NBCi, which offers e-commerce, entertainment, news and a search engine.

Looking for Suitor?

There is also the possibility that NBCi is ramping up for a liquidation or acquisition. According to published reports, NBCi has said that the latest round of cuts may not be the last workforce slash because the company executives are preparing the firm for a potential liquidation or acquisition.

On news of the layoffs, NBCi's stock was trading at $4.13 early Thursday, down slightly from $4.19 at close of market on Wednesday.