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Chinadotcom to Cut More Than 15% of Staff by June End
Asian Internet conglomerate Chinadotcom said Wednesday that it will cut about 15 per cent of its 2,400-strong workforce by the end of June and sell non-core assets in a bid to slash costs, spreading more gloom over prospects for battered Internet media companies.
"Although these are difficult decisions to make, we believe we are taking the steps necessary to align expenses with revenues during this challenging market environment," Daniel Widdicombe, Chinadotcom's chief financial officer said in a statement.
Hong Kong analysts said the moves were long overdue, noting Chinadotcom has not been immune to the world downturn in online advertising and information technology spending.
But most said they were not impressed enough to change their "neutral" or "hold" recommendations on the stock.
Chinadotcom was among the earliest Internet concept stocks from Asia to list on the US Nasdaq. After making its name in the market with two spectacular stock sales during 1999-2000, its enviable US$443 million cash pile (as of December 2000) is now doing little to bolster investor interest in its stock.
Aside from reducing staff levels, the company also wants to eliminate asset duplication, which analysts said was a result of the aggressive acquisition push funded by its warchest.
The firm said it has been working since January to cut recurrent operating expenses by selling, closing or scaling-back non-core operations in South Korea, Singapore, Japan the United States, the Chinese mainland, Hong Kong and Taiwan.
"Now, the revenue is clearly less than what they expected and what we expected, so you have to cut down the cost side to compensate for that," said Merrill Lynch analyst David Cui, who has a "neutral" rating on the stock.
Chinadotcom in mid-March posted fourth quarter revenue of US$34.4 million, which lagged the previous quarter. It said revenue in the current quarter will fall a further 25 per cent.
Its fourth quarter net loss, including items, was US$133.2 million. It has already warned that it could miss its target of breaking even on earnings before interest, taxes, depreciation and amortization basis by the end of this year, due to higher costs, uncertain revenue and a tough economic environment.
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