No End in Sight for Dot-Com Layoffs

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

Internet consulting firms Organic and Bigstep.com, as well as RealNames.com, a company that operates anInternet 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 completelydisconnected from the number of people actually using the services.”

Pink Slip Parade

Advertisers and marketers that rely on dot-com customers have joined thelayoff parade. Mediaplex (Nasdaq: MPLX), a San Francisco, California-based companythat provides technology for online advertising, said Thursday it will cut28 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 inSuperior, Colorado, said it is letting go about 100 workers as part of a planto 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, MessageMediasaid.

The company also said the restructuring was necessary because of “softeningindustry conditions” and a shift in investor focus to profitability frommarket share.

Time for Change

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

“The projected shortfall is due to a combination of budget reductions atseveral of our larger clients, the successful completion of project workduring the third quarter that did not result in add-on opportunities movingforward, 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 consultantsViant, Scient and Xpedior, which have all been hurt by a slowdown inspending 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 marketcapitalization should indicate that the driver of these cuts is not cashpreservation, but rather optimizing market opportunity,” RealNames chiefexecutive officer Keith Teare said.

Bad Omen

For some companies, though, layoffs signal the beginning of the end. InJune, 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 122dot-coms that laid off workers in the eight months leading up to the studysubsequently 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.”