Evoke Restructures to Speed Profitability

Virtual meeting services provider Evoke Communications Tuesday announced
plans for a restructuring in the hopes of achieving cash flow profitability
in first quarter 2002.

The new business plan, which the company said is fully funded, focuses on
Evoke’s core service offerings — Webconferencing and collaboration — while
eliminating back-end service engines and slashing operating expenses by
about $25 million over the next 12 months.


The reduction in operating expenses includes cutting the company’s workforce
by about 112 people, bringing the total staff to about 208. The company’s
sales force will comprise about 80 of those 208 positions. Evoke also plans
to reduce the costs associated with leasing field offices by leveraging
virtual offices in some of its major markets.

“Our mission of becoming a strong, operationally excellent organization with
a superior service offering and exceptional customer support was the driving
force behind the restructuring,” said Paul Berberian, president and chief
executive officer. “Although we’ve had to make some difficult decisions, we
believe the company will be better positioned to sustain simple, reliable
services for our customers and partners.”

The new strategy coincides with the resignation of Chief Financial Officer
Terry Kawaja, though the company said he would remain with the company
through a transition period.

“We thank Terry for his contributions during this past year and wish him
well in his new initiatives,” Berberian said. “Terry’s merger and
acquisition skills were critical when our strategy was more acquisition
focused. However, with the current market conditions, the company requires
an operationally focused CFO to support our restructuring strategy.”

Ken Mesikapp, vice president of finance, will step into Kawaja’s shoes as
acting CFO.

Evoke said its financials remain strong, with more than $43 million in cash
on hand and minimal debt as of Dec. 31 2000. Also, Evoke said it anticipates
to report revenue exceeding Wall Street’s expectations for fourth quarter
2000.

“We have achieved tremendous growth in our core services, Webconferencing
and collaboration, as evidenced by the continued strength of our financial
performance in the fourth quarter,” Berberian said. “We continue to drive
usage of our services by adding customers, further penetrating existing
customers and adding new distribution partners. By focusing our efforts on
these core competencies, we can most efficiently grow our business.”

Evoke’s renewed focus on its core services means it will jettison Web Talk,
its voice chat service, and Talking Email, its voice-to-email messaging
service. The strategy also focuses on strategic outsourcing, as evinced by
the company’s new strategic alliance with Digital Island, which will now
outsource its Webcasting service. The company said it would continue to
offer streaming functionality as a feature of its Webconferencing and
collaboration services. Under the terms of the alliance, Digital Island will
also become a reseller of the company’s virtual meeting services.

Evoke is also refocusing its marketing strategy on revenue generating
activities such as sales-lead generation through customer-centric marketing.
The company said its marketing purchase commitments with [email protected] and
Lycos have been significantly reduced or eliminated.

Related to that move, the company intends to write off about $8.6 million in
the fourth quarter of 2000, reflecting costs associated with terminating its
agreements with [email protected], as well as the reduction of certain lease and
related facility expenses and other costs. The company also anticipates
write-offs in 1Q01 which will include employee severance packages related to
the restructuring.

The company said reductions in its operating expenses due to the plan should
lead to EBITDA losses in the range of $14 to $18 million in

2001,
significantly lower than the estimate under the company’s previous plan.
Additionally, the company said the timing of the restructuring means about
two-thirds of those losses will take place in the first quarter.

“While we have lowered our 2001 top-line estimates to reflect our
restructuring, we anticipate these initiatives will have a very positive
impact on EBITDA as reflected by our revised guidance,.” Berberian said. “We
expect continued strong revenue growth in 2002. This restructuring provides
a solid foundation from which we can continue to grow revenues and attain
profitability.”

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