Avenue A Takes the Cost Reduction Track
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Ad network Avenue A said it will meet its previously forecast quarterly revenue goals, but expects at least two more quarters of poor revenue performance -- and it will axe 15 percent of its workforce to cut costs.
The Seattle-based ad firm said it would post fourth quarter 2000 revenues of $47.2 million, in line with previous guidance and unchanged from the previous quarter's revenues.
But Avenue A had disappointing news about the road ahead; the company said it expects first-quarter 2001 revenues to be $30 million to $33 million, 30 to 35 percent below quarterly revenues a year earlier. It also projected that 2001 full-year revenue would be $164.6 million, or about 15 percent below 2000's revenues.
The company did not give net earnings guidance, although industry analysts expect the firm to post a loss of $0.11 per share for the quarter, according to Thompson Financial/First Call estimates. Last quarter, the company reported a loss of $12 million.
Spokespeople from the firm cited the continuing shakeout among pure-play dot-coms as a impediment to near-term revenue growth. The company also said its future outlook reflects a decline in ad spending from some of its larger clients, due to softness in their businesses.
Avenue A also announced that it would combat lax spending by cutting about 60 to 70 positions, or 15 percent of its workforce.
"This cost reduction program is a difficult but necessary step in light of the current softness in the Internet advertising market and our focus on profitability," said chief executive Brian McAndrews. "However, I feel strongly that the company is very well-positioned to take advantage of the inevitable growth in our markets, once the impacts of the dot-com shakeout diminish and industry conditions improve."
The company said it believes those cuts, and a continuing shift away from pure-play dot-coms to fewer, higher-margin clients, will assist its drive to gross profitability, which it plans to hit sometime during the first half of 2002.
Officials from Avenue A said they believe that the company has sufficient cash to reach profitability, with about $136 million in cash and marketable securities as of the end of September.