E-business marketplace provider FairMarket (Nasdaq: FAIM) announced Wednesday that it is laying off 38 employees — 35 percent of its workforce — due to “continuing trends in the e-business marketplace.”
Company spokesperson Janet Smith told the E-Commerce Times that the job cuts “came across all functional areas.” Severance packages were based on length of service, Smith said.
FairMarket provides e-business selling and marketing services, including automatic markdown, auction, fixed-price and merchandising tools. The company said it expects to incur a charge of approximately US$500,000 in the third quarter related to the workforce reduction, but added that it remains in a strong financial position.
“We believe we are poised to weather the current economic conditions and remain optimistic that we will resume growth in the future,” FairMarket interim chief executive officer Nanda Krish said.
At midday Thursday, shares of FairMarket were up more than 5 percent on the news, rising to $1.02.
Last month, Woburn, Massachusetts-based FairMarket reported a net loss before equity-related and restructuring charges of 16 cents per share for the second quarter of 2001.
FairMarket closed the quarter ended June 30th with $67 million in cash and no debt. However, the company lowered its 2001 revenue outlook as part of its Q2 earnings announcement, stating that it expected its 2001 revenue to be down as much as 15 to 20 percent versus 2000, due to the uncertain economic climate.
FairMarket also has become one of the many New Economy companies to be hit with a shareholder class-action lawsuit — in fact, more than one — related to the company’s initial public offering (IPO).
Growing Too Fast?
FairMarket’s falling revenues and job cuts come even though the company has inked several major partnership agreements over the past six months.
This summer, FairMarket provided Miller Brewing Company with a promotional auction service for the second year in a row, and announced an agreement to host and maintain Egghead.com’s auction site. Egghead, however, has since filed for bankruptcy.
In February, FairMarket struck a deal with eBay, enabling its clients to sell their wares directly over the eBay marketplace. FairMarket also has ongoing relationships with Dell Computer, JCPenney and CompUSA, but it lost a major client in Microsoft.
FairMarket additionally has offices in the UK and Germany, and provides auction services to UK appliance and electronic goods e-tailer Comet.
According to a study released in July by the National Association of Purchasing Management (NAPM) and Forrester Research, there was a “significant” expansion in the use of B2B online auctions between April and June, with more than 20 percent of organizations buying products or services via Internet auctions.
In addition, although progress on the Internet procurement front has been hampered by the sluggish market, the study said few firms identified the economic downturn as a “predominant” concern.