Open Market Cuts Workforce by 23 Percent

Internet software maker Open Market Inc. Tuesday revealed it would slash its workforce by 23 percent after announcing lower-than-expected results for the second half of the year.

Open Market said the restructuring, which eliminates 150 (80 employees and 70 contractors) of its 650 person workforce, would allow it to intensify its focus on reaching profitability by the second half of 2001 and developing the highest growth segments of its business. The company estimates the lay offs will reduce expenses by $3 million to $4 million per quarter, though it will record a restructuring charge of $6 million to $7 million in the fourth quarter, including goodwill of about $3.3 million.

The quarter ended Sept. 30, and based on preliminary review and analysis, the company’s net revenue is not expected to exceed $23.5 million. It expects to report a net loss from operations of at least 25 cents per share, far short of the 14 cents a share Wall Street had predicted. In 1999, the company only reported a net loss of nine cents per share in the third quarter.

The company blamed its shortfall on the continued decline of Transact revenues and ongoing realignment and expansion of its North American sales organization. Transact is the company’s e-commerce suite, offering transaction processing, subscription administration, order management and customer service software. Open Market said it continues to see healthy growth in its international operations and that quarterly worldwide revenue form its content-centric eBusiness applications is expected to increase 300 to 400 percent over the same quarter a year ago.

As part of the restructuring, Open Market is looking for professional services partners and plans to leverage its own professional services organization to focus on higher-margin design assurance services for partners. It also wants to divest its online storebuilder product, ShopSite, and is in discussions with interested parties.

“While the third fiscal quarter did not meet our expectations and we will not meet profitability expectations for the fourth quarter, the restructuring plan has, as a priority, profitability in the second half of 2001,” said Harland LaVigne, interim president and chief executive officer of Open Market. “In restructuring the company, we are focusing all resources on the company’s strongest assets — our global customer base and our leadership position in content-centric eBusiness applications layered on top of popular J2EE (Java 2 Platform Enterprise Edition) application servers.”

The company said it will release final financial results for the third quarter on Oct. 19.

Open Market stock was down 19 percent to 3 3/16 in late morning trading Tuesday.