Razorfish Cuts Q4 Estimates, Says it Will Not Cut More Staff

New York-based I-shop Razorfish continued the seemingly unending litany of bad news in the sector, announcing that it would not see an expected profit this quarter, and will miss estimates by a sizable amount.

Wall Street estimates had anticipated a profit of $0.02 for the Silicon Alley-based firm. Now, the company expects a pro forma net loss per share of between $0.17 and $0.22 for the quarter, on revenues of about $50 million, before amortization and an unspecified restructuring charge.

Last quarter, the company posted a loss of $0.01 per share. It did not give guidance for the year.

The company attributed the revised outlook to poor economic conditions that have hammered companies’ technology investments, and unexpectedly lengthened sales cycles “associated with increasing project size and complexity,” in a statement made late in the trading day.

“The market for our services has changed dramatically and we underestimated the magnitude of this shift,” Razorfish chief executive officer Jeff Dachis said in the statement. “As a result, we overestimated the visibility of our pipeline and our performance expectations. Despite the market shift, we still believe that the underlying trends and strengths of our business model remain in place.”

In the statement, the five-year-old Alley firm reassured investors by saying it has a consistent vision; a strong brand; leading-edge capabilities in mobile technologies and systems integration; world-class personnel and clients; and an expanding global footprint.

It also said that it has enough in cash to “fund the future investment needed to grow the company.” According to regulatory information, the company has about $84 million in cash and marketable securities.

“We believe that the performance improvement plan we initiated in October is the right direction for our business,” Dachis said. That plan included the layoffs of up to 200 employees, or 10 percent of its staff, and was announced after the company cut its third-quarter earnings estimates.

“We are confident that following this market transition, as trends in the economy and technology sector strengthen, demand for our unique services will regain strength in the new year,” Dachis said in the statement.

The news continues what has become a torrent of bad news issuing from the Internet technology and marketing consultancy sector. Within recent weeks, marchFIRST, iXL, Viant and others issued warnings, cut staff, and/or announced reorgs.

However, Dachis indicated that his company has no plans to undertake any “significant” staff reductions.

“We believe in our employees and our ability to weather this transition as we remain focused on our long-term objective: creating the world’s leading digital transformation services company,” he said.

Shares of Razorfish closed up during the day’s trading before the market closed, finishing up about 21 percent, at $3.09. Last week the stock hit a 52-week low on news of competitor Scient’s cuts and restructuring.

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