It is not surprising that you have heard of people leaving NETP. They formally announced two weeks ago they were laying off 65 with immediate effect as part of their restructuring.
It still has 334 employees which is still too large, in my opinion. AUTONOMY, for example, has 179.
The biggest lay-offs were in R&D (20) reducing it to 114, which is still too large. There were a few lower level tele-sales staff from headquarters laid off but otherwise no sales staff. They are continuing to hire another 4 or 5 top sales staff for Knowledge Management. They have 94 in sales of which 40 are in direct sales. Most of these are new, seasoned salespeople on high compensation packages brought in to support the new emphasis to sell to multi-point retailers and Fortune 1000 and to aim for $1+miilion deals rather than the old average of $350,000 which was influenced by the number of dot.coms NETP served.
You can read the entire thing and the substantial reductions in costs it will produce on the web site or in press releases.
IMO they could cut out another 30-50 people. R&D is still too fat, and I think they could contract out some of the consulting.
My guess is that they probably hope to lose another 5-10% over the next five quarters by normal attrition. So if additional people are leaving, thats not a bad thing.
The shortfall in 3Q was due to the sales cycle getting longer for a number of reasons but principally because NETP was going for bigger sales with bricks and mortar blue chip companies who typically take longer to test and compare alternatives. Late in 3Q competitors appeared to cause this testing to take longer. NETP lost only three bids for new business to competitors. NETP miscalculated the time it would take to close sales especially the big ticker $1+million Knowledge Management sales. Some of them are in pilot studies now for more than 6 months and they can take 9-12 months before the close.
They also lost some of the dot.coms who failed.
It reports that 4 of the missed sales have now closed in October and more than 10 others carried over from 3Q are expected to finally close in 4Q (or after).
IMO NETP is now for sale. Based on the new guidance given it will achieve profitability no later than 4Q 2001 and at that time will have between $75-90 million in cash (depending on the execution of its plan). Even with the loss of more than 20 of its old dot.com customers who have gone out of business, it has about 200 customers including leading blue chips and still has the leading technology both in collaborative filtering and retail analytics. Its revenues in 2000 will be between $37-43 million. In 2001 between $40-70 million.
In 4Q it is bringing out new products which amount to a virtual complete platform in commerce, including deep analytics.
This has value and I think the buy out price comes down to deciding what multiple to accord to the cash, technology, customer base and forward sales. A buyer in the right sector could make substantial reductions in staff, if there was duplication, and greatly increase sales to their own customer base.
If there is no buy out, I do not believe NETP will fade away. It will merge and if it does not merge it will still move forward to profitability The share price is a different thing. The current price does not make sense so there is no point trying to discuss it as if it did. |
