Starmedia Reorganizes

The markets reacted favorably on Thursday to Starmedia Networks Inc.‘s announcement last night that it will layoff 15% of its workforce and
reorganize its businesses.

New York-based Starmedia opened slightly up this morning to 11 11/16. The
price buoyed by a company statement that the cost cuts would allow the Latin
American online media giant to break-even by the fourth quarter of 2001 – a year
earlier than previously projected.

Under the reorganization, 125 jobs will be eliminated contributing $5
million to $7 million of the estimated $15 million to $20 million in costs
the company plans to shave. The remaining savings will come from real estate
divestitures and a reduction in duplicate service contracts, according to
industry sources.

Fernando Espuelas, Starmedia chairman and chief executive officer, in a
release said the announcement was “the culmination of a six month process
geared towards creating a more efficient StarMedia.” He added that the
company would “remain relentlessly focused on reaching profitability even
sooner than had been expected,” causing speculation in some quarters that
more cuts were yet to come.

Espuelas was not available to comment but a spokesperson for Starmedia said
the company does not anticipate any more cuts at this time “but we are
continually evaluating our operations.” She added that the current cuts were
to be applied across the company and that Starmedia’s substantial operations
in Miami will not be disproportionately affected.

A Goldman, Sachs & Co. analyst report released this morning raised concerns
that Starmedia will likely need additional financing by late 2001 to fund
operations for the following year.

According to the report, Starmedia is currently trading at 7.1 over its 2001
sales estimates, which is comparable to other online portals in the U.S.