U.S. Interactive Files for Chapter 11; CEO Out
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The situation has taken a turn for the worse at troubled i-agency U.S. Interactive, which Monday filed for Chapter 11 bankruptcy protection and announced that its chief executive has resigned.
A successor has yet to be named for CEO and president Mohan Uttarwar, who only held the top position since November. Uttarwar remains on the Cupertino, Calif.-based company's board of directors.
Vinay Deshpande, who oversees U.S. Interactive's Soft Plus business, will lead the executive team to develop a reorganization plan, which the company must do under Chapter 11 in order to receive protection from creditors.
"The reorganization plan will position the company to focus on business infrastructure solutions for the communications industry," Deshpande said. "The company believes that this segment of its business will continue to grow and provide a continuing source of potential revenue."
Trading was halted just before the closing bell Friday, as shares of USIT plummeted 10 percent to $0.56 on pending news and bankruptcy rumors.
"The company has given careful thought as to how best to protect the interests of our stakeholders, including our employees, customers, partners and creditors," chairman William Jennings said. "We decided that Chapter 11 will provide the company the greatest opportunity to address its financial and capital structure challenges in an orderly and comprehensive fashion for continued operation."
While mirroring troubles within its industry, U.S. Interactive's changes in fortune have been drastic even in comparison to other Internet startups. Less than half a year ago, U.S. Interactive had been flying high with a stock price topping $70. But a series of revenue warnings and analyst downgrades sent the stock plummeting, as the dot-com client shakeout hit the interactive services industry hard.
In November, the company missed lowered Street consensus for its third-quarter losses, by a whopping $0.74 per share. The company responded by saying it would cut about 28 percent of its staff, and relocate to Cupertino from King of Prussia, Penn.
Uttarwar, who had only just been recently appointed to the post of president, moved up to the CEO position at the time of that restructuring, while former CEO Jennings took a back seat as chairman.