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Chinadotcom to Hack 500 in Quarter Three
Chinadotcom Corp plans to cut more than 500 additional jobs in the third quarter, bringing staff levels to about 1,500 people, said the Chief Operating Officer Peter Hamilton recently.
The move comes on top of more than 400 job cuts announced in late March.
The job cuts are part of a broad cost-cutting initiative expected to save US$50 million on an annualized basis for the company. It hopes the latest initiatives will allow it to become the first Asian Internet company to break even.
The company anticipates that as a result of the cost-cutting measures it will take a one-time charge of up to US$15 million for the cost cuts, said the chief financial officer, Daniel Widdicombe.
"If we can achieve our goals, we will be the first Asian Internet company to break even," he said.
In its first bold cost-cutting move, Chinadotcom announced plans to trim more than 400 jobs by the end of June, bringing staff to less than 2,000 from 2,417 when the cuts were announced in March.
To date, the company is about 90% through that goal, with staff levels at about 2,100, Widdicombe said. It will trim most of the additional jobs by the end of the first quarter and expects staff levels at 1,500 by the end of the third quarter, marking a 38% headcount reduction in a matter of months.
At the same time, Chinadotcom plans to close unprofitable operations and offices in the U.S., Japan, Korea, China and Hong Kong as well as trim its budget for information technology, marketing and communications, the executives said. Senior management responsibilities will also change, with Hamilton focusing more on e-solutions unit Ion Global, where he is chief executive officer.
The company "will focus now on investments to drive operational improvements rather than to broaden the scope of our business," Hamilton said. However, he didn't rule out the possibility of further acquisitions, particularly in China.
"If the price is right, if the deal is right, we'd certainly be interested," Hamilton said. Though he didn't name acquistion targets, there has been speculation Chinadotcom might be interested in one of its peers in the China Internet sector, Sina.com (H.SNA, news, msgs), Netease, or Sohu.com (SOHU, news, msgs). Dow Jones, which publishes this and other newswires, owns less than 2% of Sohu.com
The company currently has US$430 million net cash, Widdicombe said.
Meanwhile, despite these aggressive cost-cutting moves, the company didn't rule out further job cuts.
"We will continue to take steps to achieve (our) goals," he said.
The company identified the cost basis and headcount it needs to break-even within the next couple of months based on current projections for revenue. Widdicombe said. The company aims to bring costs down to US$80 milllion on an annualized basis by the end of the year, he said.
Chinadotcom in March warned that first quarter revenue would decline at least 25%-30%. It will release its results Tuesday and provide guidance on second quarter expectations.
The company recorded US$34.4 million in revenue in the fourth quarter, down from US$36.5 million in the third. For the year, the company recorded a net loss of US$59.8 million, compared with a US$18.7 million loss in 1999.
The company said scaling back operations was preferable to maintaining size and losing money.
"We'd prefer to make money on US$80 million in revenue than to lose money on US$140 million," Widdicombe said, adding that gross margins will likely improve.
Hamilton was quick to point out that the broad-sweeping job cuts don't mean the company is on the brink of going under. "This doesn't signal we're losing money," he said.
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