Executives from online loyalty and email marketer Netcentives said changes to the firm’s upper ranks, and a company-wide restructuring, will put the San Francisco-based firm in a better position to attract large-scale, traditional clients.
As a result of its management changes, current president Eric Larsen will become chief executive, while chief executive officer West Shell, III, will remain chairman of the firm.
“Eric and I have formed a very effective partnership leveraging our respective strengths,” Shell said. “The Board and I are confident that with his proven track record and broad management expertise, Eric is the right leader to take Netcentives to the next stage in its growth.”
In addition to the management change, the company said it would cut about 120 positions and work to reduce administrative, travel and capital expenditures. After recording a charge of $700,000 in severance during second quarter, the company said the moves would shave $40 million in annual expenses.
“The Netcentives leadership team is being very aggressive in aligning our expense structure with growth expectations,” Larsen said. “Our cost-cutting initiatives are imperative in today’s market environment. Despite this lackluster economy, we expect first quarter’s top-line results to be in line with expectations and our EPS to improve.”
In addition to the cost-cutting maneuvers, Shell said Netcentives would focus on the financial services market — “where we have a significant competitive advantage,” he said, citing programs like registered credit card programs and enterprise incentive programs. Financial services clients include CitiGroup, Capital One and American Express, though the firm also has sizable client bases in travel and consumer apparel.
But company officials said that refocusing on the financial services niche, along with the expense reductions, should help during the current economic slowdown, which is forcing Netcentives’ other, traditional clients (like Nortel Networks) to cut back on their online marketing spending.
The company now said it plans to report full-year revenue of $65 million to $70 million, about 55 percent better than 2000, but below original expectations. The cuts, however, will shave 40 percent from expected 2001 loss per share, which Netcentives said would now come in between $0.90 and $0.95 per share.
Netcentives said it expects first quarter revenue between $15 million and $16 million, in line with Wall Street forecasts. The company said it anticipates its per-share loss coming in slightly above expectations, between $0.39 and $0.41.
Nevertheless, executives reiterated the company’s plans to break even in fourth quarter, and said that the new structure would make it easier to service large, offline clients.
The sentiments echo several other firms in the space. Online ad rep Phase2Media recently cut staff in its U.S. and European operations. However, it said the moves aligned its resources for the way that traditional advertisers are now doing business with online marketing services providers.
Specifically, some of Phase2Media’s reductions came from its U.S. telephone sales unit, which worked directly with clients, especially dot-coms. With the dot-com fallout and most traditional companies turning to their ad agencies for online work, Phase2Media said its new structure should position it for success as the economy rebounds.
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