Business-to-business (B2B) marketplace provider PurchasePro (Nasdaq: PPRO) said Tuesday it will cut its workforce in half, slash management salaries and shutter offices amid a search for additional financing or a strategic partner.
The Las Vegas, Nevada software and services provider said the moves are part of the second phase of its “turnaround strategy.” In June, PurchasePro cut its workforce from 500 to less than 300.
“While we were on track in our turnaround strategy following our realignment announcement in June, it became increasingly clear in the third quarter that PurchasePro is faced with new issues that require the company to alter its strategy and financial plan,” said chief executive officer Richard L. Clemmer.
PurchasePro is “actively seeking a strategic partner or straight cash infusion,” Clemmer said.
“We are simultaneously reviewing a range of financing opportunities,” he said. “We believe that a cash infusion will help mitigate the financial viability question and therefore better position PurchasePro to close sales in its pipeline.”
In addition to the job cuts, PurchasePro said it is reducing senior management salaries by an average of 55 percent and the amount of office space it occupies by 81 percent. In addition, chief operating officer Allen Winder resigned.
The moves are designed to save US$2 million immediately and $14 million a year going forward.
News of the new cuts came after the stock market closed Tuesday. In early trading Wednesday, PurchasePro stock fell 4 cents to 52 cents. The stock has not seen the $1 level since August 7th, and has fallen 97 percent since the start of 2001.
PurchasePro went public in 1999, and not long afterward began to predict it would quickly become profitable.
Deals with America Online (NYSE: AOL), which linked with PurchasePro to provide services to small and mid-sized businesses, and with major Las Vegas hotels have helped PurchasePro, but more recently the news has been mostly bad.
In May, the company announced that co-founder and chief executive officer Charles E. Johnson had resigned and restated first-quarter earnings to show a loss more than $14 million higher than originally announced.
Meanwhile, investors, many of them burned as PurchasePro shares tumbled, filed a spate of lawsuits against the firm.
Chief financial officer Mark Donachie said PurchasePro has a financial plan that “we believe to be nimble enough to take advantage of changes in the economic environment” and help the company achieve operating profits by mid-2002.
However, Donachie stopped short of offering any near-term guidance on the firm’s sales.
“It is clear that we have not recorded the sales that we had anticipated,” Clemmer said. “PurchasePro is facing the most difficult challenges in its short history. We must weather an economic downturn, a messy history and short sellers.”
To underscore his confidence in the company, Clemmer said he will file a plan to buy PurchasePro shares in coming weeks with the U.S. Securities and Exchange Commission.