iXL to Spin Off Some European Operations to Cut Costs
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I-shop iXL said Wednesday that it plans to continue efforts at trimming expenditures by spinning off some of its European offices into a new company.
According to the company, its Amsterdam, Berlin and Hamburg offices will become a new entity, majority owned and operated by the current iXL management in those offices. About 90 employees work in the three offices.
The move represents a reversal of sorts for iXL. In 1998, the Atlanta-based firm snapped up German interactive agency Lava GmbH and spawned what became its Berlin and Hamburg offices. Now, it appears that iXL now will give up those offices, in addition to its Amsterdam unit, founded earlier this year.
Although full terms of the deal were not disclosed, iXL said it would hold a minority stake in the new company and would serve as a partner.
Company executives pointed to the spin-off as a part of iXL's effort to refocus and revamp its business to hit profitability by the first half of 2001.
iXL last week said that to focus only on offices with a high rate of return, it plans to close or sell off its units in Hamburg and Berlin, along with its offices in Denver, Los Angeles, Madrid, Tokyo and Sao Paolo, Brazil.
However, at that time the company said that it planned to maintain satellites in several other regions, including Amsterdam, to service large clients.
"Our operations in Amsterdam are relatively small -- roughly a dozen people -- and it made sense to link them with the German operations as Germany can offer delivery capabilities to services Amsterdam is selling," said iXL spokesman Bill Getch. "It made sense from a geographic standpoint as well."
iXL chairman and chief executive U. Bertram Ellis said that measures similar to Wednesday's might be taken with regard to the other offices iXL plans to cut.
"This arrangement is mutually beneficial," Ellis said. "As an autonomous entity, the new European company can be focused entirely on its clients and local operations, and iXL has the benefit of a strong partnership with a terrific operation."
Getch added that while iXL will see some savings as a result of the spin-off, the main benefit "comes by allowing those operations to operate autonomously, link with local partners and to grow more quickly than they would with the parent attached."
In addition to closing, selling or spinning off several offices, iXL management said last week that the company also will axe about 850 positions, roughly 25 percent of the company. The firm also said it plans to restrict future clients to a few high-margin industries.