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No End in Sight for Dot-Com Layoffs

By Nora Macaluso
Dec 15, 2000 4:34 PM PT

The bad news from Internet companies continues unabated, with recent days bringing more reports of layoffs and grim financial forecasts.

No End in Sight for Dot-Com Layoffs

Internet consulting firms Organic and, as well as, a company that operates an Internet keyword system, are among the latest dot-coms to slash jobs.

"The layoffs have been escalating month by month," said John Challenger, chief executive officer of placement firm Challenger, Gray & Christmas. "For many, year-end is make-or-break time."

Internet consulting and advertising firms are suffering because "there are too many of them," Challenger told the E-Commerce Times.

"We've poured rocket fuel into these companies," he added. "The sheer numbers are completely disconnected from the number of people actually using the services."

Pink Slip Parade

Advertisers and marketers that rely on dot-com customers have joined the layoff parade. Mediaplex (Nasdaq: MPLX), a San Francisco, California-based company that provides technology for online advertising, said Thursday it will cut 28 percent of its workforce as part of a plan to reduce costs.

As a result of charges associated with the restructuring, the company said, earnings per share will be lower than previously thought. The job cuts, however, will help save about US$10 million in fiscal 2001, Mediaplex said.

Also on Thursday, MessageMedia, an e-mail marketing company headquartered in Superior, Colorado, said it is letting go about 100 workers as part of a plan to save $3.5 million to $4 million per quarter. The job cuts come with a reduction in spending on operations and certain product areas, including wireless and customer care, MessageMedia said.

The company also said the restructuring was necessary because of "softening industry conditions" and a shift in investor focus to profitability from market share.

Time for Change

San Francisco-based Organic, meanwhile, said it will cut about 25 percent of its workforce, slashing 270 jobs. The company also said that results for the fourth quarter and for next year will be below previous expectations.

"The projected shortfall is due to a combination of budget reductions at several of our larger clients, the successful completion of project work during the third quarter that did not result in add-on opportunities moving forward, and a slower than anticipated realization of new business wins," Organic chief financial officer Sue Field said.

Organic's news follows similar announcements from Internet consultants Viant, Scient and Xpedior, which have all been hurt by a slowdown in spending on Web-related projects.

Happy Face?

In yet another dot-com cutback, San Francisco-based Web site consultant Bigstep is laying off 34 of its 144 employees as a "proactive move," said spokesperson Lauren Petersen. The company, she said, is continuing to invest in its infrastructure.

For its part, Redwood Shores, California-based RealNames plans to cut 20 jobs by the end of the year. The company said it is changing its business model and eliminating customer service jobs. However, RealNames says it will increase hiring in its sales and engineering departments.

"The fact that we just raised $46.5 million on an increased market capitalization should indicate that the driver of these cuts is not cash preservation, but rather optimizing market opportunity," RealNames chief executive officer Keith Teare said.

Bad Omen

For some companies, though, layoffs signal the beginning of the end. In June, the Challenger firm released a study which found that dot-com companies that lay off workers are more likely than others to fold. Twenty-four of the 122 dot-coms that laid off workers in the eight months leading up to the study subsequently closed shop, the firm found.

According to the Challenger report, there were 8,786 dot-com layoffs in November; 5,677 in October; 4,805 in September; and 4,193 in August. Of the 31,056 planned layoffs announced by dot-coms in the first 11 months of this year, 20 percent have been from companies that closed their doors.

For consulting and advertising companies, "it has been a domino effect," said Tom Rodenhauser, the head of Consulting Information Services.

"It's roughly six months after the complete dry-up of the dot-com e-business market," and companies with heavy dot-com client rosters are now feeling the pinch, Rodenhauser told the E-Commerce Times. "Last year, they were the toast of the town, and this year they're toast."

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