Razorfish Axes 400

Despite assertions last quarter by Razorfish chief executive Jeff Dachis that no more jobs would be cut, the onetime Silicon Alley darling said it has shaved about 20 percent of its 1,900-person workforce during restructuring.

“We have initiated several important changes that will allow us to better serve our clients, increase our revenues and quickly return us to the profitability that has defined our business for over five years,” Dachis said in a statement. “Excellence in our services and profitability — these are our cornerstone operating principles. The current initiatives reflect our ongoing commitment to these principles, to our long term success, and to maximizing shareholder value.”

Details were sketchy at press time, and Razorfish spokespeople declined to elaborate beyond a rough outline of the restructuring.

The cuts come as part of a “performance improvement plan,” which the company announced in October after cutting its third-quarter earnings estimates and about 200 employees, or 6 percent of its staff at the time. At the time, Dachis indicated that his company had no plans to undertake any further “significant” staff reductions.

Apparently, that reorganization plan did in fact involve more staff cuts at the New York-based Web design and integration shop, which has 14 other offices worldwide. It did not specify which offices would be affected by the layoffs.

Razorfish said the restructuring should cut costs by about $70 million in 2001.

As have many of its peers in the interactive agency space, Razorfish said it would be reducing the types of clients that it serves. According to the firm, it will now only handle clients in the financial services, technology and telecom, media and entertainment, manufacturing, and healthcare arenas — abandoning areas like travel and leisure, non-profits, and consumer brands and retail.

That move would let it drop resource-intensive clients and refocus on high-margin areas in which the company has expertise, spokespeople said.

Razorfish also said it would realign “skills” into four “networks” — technology, strategy, experience and value — and would establish a new incentive and compensation plans at all levels.

Additional cost savings would result from consolidation and streamlining of units that serve multiple divisions — such as accounting, human resources and information services. Razorfish also said it would work to establish “restrictive expense policies” in travel, recruiting, facilities and marketing budgets.

This is the only the latest round of bad news for the Alley firm. In December, Razorfish announced that it would not see an expected profit in fourth quarter, and would miss estimates by a sizable amount. Wall Street had anticipated a fourth-quarter profit of $0.02 for the firm. Instead, the company predicted a pro forma net loss per share of between $0.17 and $0.22 for the quarter, before charges.

Analysts now expect the firm to post a fourth-quarter loss of $0.21. The company has not given guidance for the fiscal year; according to Thompson Financial/First Call estimates, analyst peg full-year losses at a penny.

Shares of RAZF closed down on the news, announced shortly before the closing bell. The stock finished the day down 8 percent, at $1.81.

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