Dot-Com Shakeout Hits Tech Research Firm

In yet another sign that the dot-com shakeout is not over, venerable tech research firm Forrester Research (Nasdaq: FORR), said Thursday that it is cutting more than 20 percent of its workforce.

“Last year was a challenging one for most companies, and Forrester was no exception,” Forrester chairman and CEO George F. Colony said. “The difficult decision to reduce our workforce reflects the continued economic downturn and the sustained weakness in the technology sector.”

Colony said the restructuring would result in 126 layoffs, or about 22 percent of the firm’s worldwide workforce, and could save the company up to US$20 million a year.

Changing Industry

Forrester’s move comes amid widespread consolidation and cutbacks in the technology market research industry. Two of the leading Internet measurement firms, NetRatings (Nasdaq: NTRT) and Jupiter Media Metrix (Nasdaq: JMXI), have announced a $71 million merger expected to close sometime this quarter.

Forrester made its own headlines during the 2001 holiday shopping season when the company dramatically cut its forecast for e-tail sales to $8 billion, a 20 percent slowdown compared to 2000.

Recent reports from rivals, however, including the eSpending index from NetRatings, Goldman Sachs and Harris Interactive, seem to indicate a stronger online shopping season, with as much as 15 percent growth.

New Game Plan

Forrester did not say where the job cuts would be made or what severance package it would offer workers. The Cambridge, Massachusetts-based company did say it would take a one-time charge of between $4 million and $6 million to cover the cost of the layoffs.

“This move continues our broad effort to prepare the company for the future,” Colony said, referring to a restructuring of the firm’s sales force in July 2001 and a reorganization that created four operating groups in October.

At the same time it plans to downsize, Forrester will also announce new product offerings and new ways of selling its market research to customers in coming weeks.

“All of these changes are part of an effort to make our business more efficient while maintaining or improving the level of service to our clients,” Colony said.

Earnings on Track

Forrester also reiterated its previous fourth-quarter guidance, calling for revenues of $33 million to $35 million and earnings of 20 to 22 cents per share, which is within the range expected by Wall Street analysts.

The company said it would reveal more about its expectations for 2002 when it releases its Q4 earnings on January 30th.

Forrester was founded in 1983, making it one of the oldest firms researching the Internet and e-commerce sectors. It runs a San Francisco, California research center and following rapid expansion in the 1990s, now has overseas offices in London, Frankfurt and Amsterdam.