Modem Media Cuts 10%, Will Close Tokyo Office
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Modem Media Thursday said it is making another round of cuts and will be tweaking its worldwide organizational structure in an effort to reduce expenses.
As part of the cuts -- which claim 10 percent, or 95 employees -- the firm said it plans to close its Tokyo office during second quarter, and would be realigning "capacity" in its remaining nine offices. Clients of the Tokyo office would be transitioned to Modem Media's Hong Kong unit.
"While performance in our Tokyo office had been improving recently, that improvement and the prospects for the business were insufficient to keep the office open," said Modem Media Chief Executive Officer Marc Particelli.
As a result, the Norwalk, Conn.-based company expects to take a one-time, pre-tax charge of approximately $3 million in the first quarter, though it anticipates saving about $5 million during 2001 as a result of the cuts.
He added that the workforce reductions -- combined with the windfall from Modem Media's December sale of its controlling interest in marketing optimization firm CentrPort -- should "reinforce Modem's financial position and prospects."
Despite Particelli's assertion, the company's immediate financial position and short-term prospects remain in question. Earlier this week, Modem Media postponed its fourth quarter and full year 2000 financial results, pending an analysis of the company's impairment situation and a review of the goodwill associated with its February 2000 acquisition of e-commerce developer Vivid Holdings.
Particelli said that Modem Media expects to announce its year-end results following the completion of its impairment analysis, though he did not give an expected date.
That delay in reporting its earnings is also one of the reasons its majority shareholder, ad group True North Communications, is delaying its own earnings report.
This week's developments continue a string of restructuring efforts that began in December, when executives said they expected the company would not repeat its third-quarter profitable performance and that revenues would likely be lower than expected.
At that time, the firm cut four percent of its staff and said it would reduce office space in its San Francisco and Tokyo offices. Officers also hinted that they were considering additional ways to deal with overhead in Tokyo.
In January, company co-Founder, Chairman and Chief Executive G.M. O'Connell turned over his CEO position to Particelli, in an effort that would help the company focus on strategy and financial performance.
At press time, shares of Modem Media
were trading down 18.57 percent, at $3.56.