Modem Media Thursday said it is making another round of cuts and will be
tweaking its worldwide organizational structure in an effort to reduce
expenses.
As part of the cuts — which claim 10 percent, or 95 employees — the
firm said it plans to close its Tokyo office during second quarter, and
would be realigning “capacity” in its remaining nine offices. Clients of
the Tokyo office would be transitioned to Modem Media’s Hong Kong unit.
“While performance in our Tokyo office had been improving recently, that
improvement and the prospects for the business were insufficient to keep the
office open,” said Modem Media Chief Executive Officer Marc Particelli.
As a result, the Norwalk, Conn.-based company expects to take a one-time,
pre-tax charge of approximately $3 million in the first quarter, though it
anticipates saving about $5 million during 2001 as a result of the cuts.
“Over the last few weeks, we completed a comprehensive review of the
operating structure of the company, and it is clear that these incremental
actions will only further strengthen our business,” Particelli said.
He added that the workforce reductions — combined with the windfall from
Modem Media’s December sale of its controlling interest in marketing
optimization firm CentrPort — should “reinforce Modem’s financial position
and prospects.”
Despite Particelli’s assertion, the company’s immediate financial
position and short-term prospects remain in question. Earlier this week,
Modem Media postponed its fourth quarter and full year 2000 financial
results, pending an analysis of the company’s impairment situation and a
review of the goodwill associated with its February 2000 acquisition of
e-commerce developer Vivid Holdings.
Particelli said that Modem Media expects to announce its year-end results
following the completion of its impairment analysis, though he did not give
an expected date.
That delay in reporting its earnings is also one of the reasons its
majority shareholder, ad group True North Communications, is delaying its
own earnings report.
This week’s developments continue a string of restructuring efforts that
began in December, when executives said they expected the company would not
repeat its third-quarter profitable performance and that revenues would
likely be lower than expected.
At that time, the firm cut four percent of its staff and said it would
reduce office space in its San Francisco and Tokyo offices. Officers also
hinted that they were considering additional ways to deal with overhead in
Tokyo.
In January, company co-Founder, Chairman and Chief Executive G.M.
O’Connell turned over his CEO position to Particelli, in an effort that
would help the company focus on strategy and financial performance.
At press time, shares of Modem Media were trading down 18.57 percent, at $3.56.