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Tuesday April 30, 11:34 am Eastern Time
Reuters Business
Certicom to cut staff, exit California--source
By Ian Karleff
TORONTO, April 30 (Reuters) - Certicom Corp (NasdaqNM:CERT - news; Toronto:CIC.TO - news), a Canadian maker of encryption software for mobile devices, will announce a fourth restructuring on Tuesday, dismissing key executives and shuttering its California office, a company source said.
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The source told Reuters on Tuesday that the company plans to make the announcement after markets close in order to include the related restructuring charges in its fiscal 2002 year-end financials ended April 30.
"It's the end of the year for Certicom. Instead of growing they are chopping more heads... I have to think it will be another 40 people," said the source.
He said Certicom will slash its worldwide sales force to five, from about 20 today, and fire its senior vice presidents of sales and strategy, as well as the head of product development and director of sales support. The European office will be cut by two-thirds to three people.
Certicom did not immediately return calls seeking comment.
Certicom's payroll has already been reduced to about 130 employees, from about 210 in June 2000.
Shares of Certicom were up 14 cents or 10 percent at $1.49 on Nasdaq on Tuesday, down from a September 2000 high of $44, and up 9 Canadian cents at C$2.25 in Toronto. Its market capitalization has shrunk to a mere $52.5 million, down from more than $1.5 billion, although analysts do not see it as a takeover target because of its mounting losses.
The company slashed costs amid slow demand for its products despite high profile license agreements with the likes of Palm Inc (NasdaqNM:PALM - news)., Research In Motion (NasdaqNM:RIMM - news), Motorola (NYSE:MOT - news) and Qualcomm (NasdaqNM:QCOM - news).
The mobile security products sector has been hurt by the reluctance of companies to spend on technology products. Certicom rival RSA Security Inc. (NasdaqNM:RSAS - news) warned in early April that expected profits would turn to losses in its first quarter.
The source said the restructuring will see the closure of the company's Hayward, California office, which became Certicom headquarters in 1999 as it moved closer to Silicon Valley. The European office is also expected to be reduced in size.
Analysts have speculated that more job cuts are needed at Certicom to stop the bleeding as sales continue to shrink.
"We believe further reductions in head count are necessary in order for the company to achieve operating break-even by October 2002," National Bank Financial analyst Gareth Tingling wrote in a February research report.
Certicom has been struggling with shrinking revenues and mounting losses. Sales dropped to $3.2 million in the third quarter, down from $7.6 million a year ago. Operating losses were $7.8 million, down from year earlier $12.5 million.
The company is also burning through its cash resources at a rapid rate, with cash and marketable securities dropping to $18.8 million at the end of January, down from $52.2 million at the beginning of its fiscal 2002.
Certicom is on its third chief executive since going public in 1995. Industry veteran Ian McKinnon was appointed to the post in February after the resignation of Rick Dalmazzi in October 2001 and Phillip Deck in December 1999
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