Razorfish Announces New CEO, Q1 Results

Jeff Dachis, one of the founders of digital consulting firm Razorfish , has stepped aside as chief executive of the company and will be replaced by chief operating officer Jean-Phillippe Maheu, the company announced today.

Dachis’ childhood friend Craig Kanarick, with whom he launched the company six years ago, also said he would step aside as chief strategic officer. Both will remain co-chairmen of the company’s board of directors.

The news ends months of speculation that the head of the troubled firm, whose stock price has dipped below a dollar in recent weeks, would be asked or forced to step aside as the red ink continued to pile up from quarter to quarter.

The announcement about the management changes came as the company released first quarter results of a pro forma loss of $6.6 million, or 7 cents per share, on revenues of $42 million. The results were almost a total reverse of the same year-ago period, when it earned $6 million, or 7 cents per share, on revenues of $64 million.

Overall, the company’s losses for the period were $24.9 million, or 25 cents per share. The overall year-before profit was $4.5 million, or five cents per share.

The losses marked the second straight quarter in the red since the company went public. During the fourth quarter of 2000, the company’s net loss was $19.8 million, or 20 cents per share on a pro forma basis on revenues of $50 million.

Shares of Razorfish closed down by 20 percent at $1.22 during trading on the Nasdaq Thursday, close to 100 percent below its 52-week high.

Like other consulting agencies in the interactive services sector, Razorfish has been hit by a collapse in spending on dot-com projects, along with a general pullback in tech consulting projects by corporate clients. Since the fall, nearly half of the over 2,000 employees of the firm have either been laid off or have left.

When Dachis and Kanarick founded the company, they quickly became known for their design savvy with Web sites. Their abilities caught the major consulting and advertising industries flat-footed as the Web craze took off. Awash in the dot-com craze of the late 1990s, the firm went public in 1999 and traded as high as 58 after its spring debut.

But it got caught up in the interactive services roll-up binge of the past three years, acquiring smaller design shops and Web integration firms in a frenzy of deals between 1998 and 1999.

Some of Razorfish’s past acquisitions include Silicon Alley start-up Avalanche Systems Inc., London-based CHBi Ltd., San Francisco-based Plasticweb, Los Angeles-based Media, and London-based Sunbather Ltd., helping to boost its revenues by more than three-fold in the process.

After the market sell-off began in earnest in Spring of 2000, however, Razorfish’s stock got dragged down with other hard-hit agencies that rapidly expanded to take advantage of a boom in technology spending.
By early January, with Razorfish shares already close to dipping below a dollar, the company authorized a stock buyback program to protect its price.

“Under the program, the purchases will be funded from available working capital, and the repurchased shares will be held in treasury or used for ongoing stock issuances under employee stock plans,” the company said at the time.

Both Dachis and Kanarick are expected to continue their work with the arts-focused Web shop they also founded, Razorfish Studios.

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