iXL Cuts 850, Will Limit Client Roster
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I-shop iXL on Tuesday said it would undertake a radical restructuring, selling or closing several of its offices, cutting staff dramatically, and selling off some of its assets in an effort to move to profitability.
The Atlanta-based company said it plans to reduce its workforce by about 35 percent -- 850 employees -- to reduce costs with the goal of reaching profitability by early 2001. In addition, the company said it will close or sell seven of its 20 offices within the next few weeks. Those slated for sale or closures are its Berlin, Denver, Hamburg, Los Angeles, Madrid, Sao Paolo and Tokyo offices.
"All of our sales and client service operations will be centered around our top 10 offices, which are performing extremely well. This structure is designed to deliver a higher level of quality and depth of expertise for our clients," said iXL chairman and chief executive officer U. Bertram Ellis.
Those clients -- which the firm identified as its "top 75" -- and iXL's new wins going forward, at least for the time being, will be restricted to three industries: financial services, travel and retail/consumer packaged goods. Current clients in those industries include Chase Manhattan Bank, Discover Financial Services, and Sony.
"We have more than 300 clients now," said iXL public relations director Bill Getch. "The top 75 represent 90 percent of our revenue. The other 225+ are less profitable but very time and resource consuming." Getch said iXL's current contracts with those remaining clients will be allowed to lapse.
Investors reacted favorably to the news, with the stock up 5.88 percent to $1.13 by press time.
The company also intends to sell off portions of the firms in its iXL Ventures accelerator portfolio, to free up additional cash to pull it through the reorg. Part of its interest in ProAct Technologies, formerly Consumer Financial Network, will be the first to go, although the company did not disclose other holdings it anticipates selling.
Other firms in the iXL Ventures portfolio include New York Times Digital, LastMinuteTravel.com and Winstar Communications.
In addition, the company said it is working to sell or spin off its Digital Media and Solutions operations and its Online Learning, Marketing Services and Wireless units.
"We are pleased with the enthusiasm that these valuable assets have received," Ellis said. "While we are bullish on these iXL units, they do not fit within our overall vision for the company. They will have more value to iXL spun out on their own."
"We are creating an extremely focused, tightly-run company going forward. Although we are now a smaller company than we were six months ago, I believe this will make us a much stronger company as a result," Ellis added.
iXL's news comes after several competing firms have announced cuts and restructurings, following a season of poor revenues. In late October, marchFIRST posted disappointing third-quarter earnings. The firm said in November that it would cut 1,000 jobs to boost operating margins. I-shop Luminant Worldwide said Nov. 10 that it planned to eliminate 225 positions. And later that day, U.S. Interactive missed lowered third quarter revenue estimates and announced management changes and staff cuts of 28 percent.