Thestreet.com Cuts Staff, Shuts UK Operation ... Staff cut, Cramer still there?
By Reshma Kapadia
Thursday November 16, 4:02 pm Eastern Time
NEW YORK (Reuters) - Online financial information company TheStreet.com Inc. (NasdaqNM:TSCM - news) said on Thursday it would cut 20 percent of its U.S. staff, or 40 jobs, and close its British operations in an effort to turn a profit sooner.
The New York-based TheStreet.com, which has about $90 million in cash, said its decision to cut jobs and pull the plug on TheStreet.co.uk and its joint newsroom venture with the New York Times would help save $18 million a year.
The leading financial news Web site, which was co-founded by hedge fund manager James Cramer, would consider selling itself as well as looking at its own acquisitions to boost growth, Chief Executive Thomas Clarke said in an interview.
TheStreet.com's shares were down 3/8, nearly 11 percent, at $3-1/8 in late trading on Nasdaq. Its stock has fallen 84 percent from its IPO price of $19 in May 1999 and about 95 percent from the high of $60 on its first day of trade.
Online media companies, largely dependent on advertising revenues, have taken a similar beating in recent months as they struggle to turn a profit amid slowing online ad spending.
TheStreet.com said it will take a charge of $6 million to $8.5 million for its cost-cutting efforts. It plans to give more guidance on earnings and revenues in December.
``In light of the circumstances and our focus on getting to profitability as soon as possible, it made sense for us to spend some money now to save a lot more later,'' Clarke said.
SLOWING AD SPENDING
The shares of rival MarketWatch.com (NasdaqNM:MKTW - news), in which Viacom Inc. (NYSE:VIA - news) and Data Broadcasting Corp.(NasdaqNM:DBCC - news) have stakes, have fallen more than 90 percent from the $97.50 high hit on the first day as a public company in January 1999 after it went public at $17. Its shares were off 7/16 at $4-1/2 in late afternoon trading Thursday.
Several Web content companies have cut their staffs and shifted their models, and traditional media companies such as Dow Jones & Co. Inc. (NYSE:DJ - news) and New York Times Co. (NYSE:NYT - news) have shelved IPO and tracking stock plans for their online units.
``It has certainly been a trying time,'' Clarke said. ''However, we like our cash position and have made appropriate restructurings that we feel are going to drive us forward.''
Over the summer, TheStreet.com shifted from a subscription- based model to a primarily free model. In October, the company said its third-quarter loss widened amid difficulties in driving traffic to its site, delays with some distribution deals and the slowdown in online ad spending.
``Certainly we have had areas where we wished we would have evolved differently, but October was a record month for page views and visitors, so I think we are trending positively so we are feeling pretty good about (the model),'' Clarke said.
The ad slowdown was a factor in the cost-cutting efforts, but not a significant driver in the decisions, Clarke said.
PULLING THE PLUG
The Street.com's decision to pull the plug on TheStreet.co.uk, which employed 64 people, marks the first big British Web content casualty. The operation was going to run out of money by Dec. 31.
Neither TheStreet.com, which owns 63 percent of the unit, nor its U.K. investors were willing to provide additional funding, the company said.
The U.K. operations accounted for about $9 million of TheStreet.com's consolidated net losses for the nine months ended Sept. 30. TheStreet.com said it reached a pact with the U.K. investors to buy their 2.55 million shares for $3 million in cash and 1.25 million shares of TheStreet.com.
TheStreet.com also said it reached a mutual agreement with the New York Times Co.'s (NYSE:NYT - news) digital unit to cease operations of their joint newsroom by the end of the month.
TheStreet.com said the decision came after the costs of the venture outweighed the benefits. The companies will continue their ad and syndication relationship, executives said.
The venture was created 18 months ago to expand the financial news coverage of both TheStreet.com and NYTimes.com, the Web site for the newspaper. The New York Times owns a 5.7 percent minority interest in TheStreet.com.
On the New York Times front, the digital unit will boost its own Internet business coverage and the Times may decide to hire new reporters to replace the existing joint team, said Richard Meislin, editor in chief of the Time's digital unit.
ACQUISITIONS
While Clarke said the company was looking at acquisitions as a way to drive business, one analyst said the company's cost-cutting appeared more to be positioning TheStreet.com for a sale than for setting the table for expansion through acquisitions of its own.
``We think these are positive steps from a fundamental standpoint, but think ultimately this may be a pre-sale house-cleaning announcement,'' said Michael Forbes, analyst at First Albany, about TheStreet.com's cost-cutting plans.
Clarke left the door open to such a move, but disagreed that the moves were ``house cleaning.''
While the industry as a whole has had a difficult time, Forbes said TheStreet.com was in a different situation than some of its rivals, such as Marketwatch.com Inc.(NasdaqNM:MKTW - news)
``You have to look at them in a fishbowl. They have changed their management, business models, launched the UK site, had new investors and lawsuits,'' Forbes said. ``You can't compare them to Marketwatch because they have been implementing a business model that was announced at its inception and has been hitting various milestones along the way.'' |
