Co-founder leaves Netpliance as layoffs continue

The troubled company announces the resignation of President Kent Savage and reduces its work force by half.

2 min read
The exodus from troubled Internet appliance maker Netpliance continued Friday, as the company announced 76 more job cuts and said President Kent Savage has resigned.

As earlier reported by CNET News.com, further layoffs at the Austin, Texas-based company had been expected and come in the wake of a failed bid by management to take the company private. Friday's cuts account for 54 percent of the company's entire staff.

The company first laid off employees in November when it reduced its head count by 38 percent, slashing 93 positions. As a result of Friday's across-the-board layoffs, the company said it expects to lower annual operating expenses by approximately $6 million.

Chief Financial Officer Kit Webster said in an interview that Netpliance will continue to support existing customers of its I-opener Web-surfing appliance. However, as it had said it would in November, the company stopped selling the unit at the end of last month. Netpliance is now focused on helping other companies offer Internet appliances.

Webster declined to comment on the departure of Savage, who co-founded the company in January 1999.

Netpliance said Savage's resignation will take effect March 15. Savage resigned to pursue other opportunities, but he will remain on the board.

On Thursday, Netpliance confirmed the resignations of its chief operating officer, Valerie Walden, and Kenneth Kalinoski, vice president and a co-founder.

Last week, Netpliance announced that an investment group led by CEO John McHale had pulled an effort to take the company private. The group made a bid in December to buy the shares that it did not already own. They offered 65 cents per share.

The bid, which was dramatically below Netpliance's 52-week high of $26.12, angered investors and prompted shareholder lawsuits.

The company has been Trading on thin icestruggling in the nascent and challenging Internet appliance market. It also faces delisting from the Nasdaq because its stock price has hovered below $1 for some time. The price recently hit a low of 28 cents a share.

IDC analyst Bryan Ma said Netpliance is still suffering from the fianncial hole it got in by trying to build a consumer business around a new product category.

"It just goes to show the capital crunch and the beatings they got for the loss-leading business model they had," Ma said.

Ma said the Internet appliance business is likely to be centered around larger companies with more cash and staying power.

"Smaller companies that may not have the cash are going to be increasingly constrained and challenged," he said.