Avenue A Takes the Cost Reduction Track

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.