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Anti-piracy company cuts staff, looks for exit

Preview Systems says it will cut 25 percent of its staff and explore new "strategic" options that could include selling part or all of the company.

Preview Systems, one of the original companies offering anti-piracy protections for online digital products, on Tuesday said it would cut 25 percent of its staff and explore new "strategic" options that could include selling part or all of the company.

Citing growing competition from large companies, Chief Executive Vincent Pluvinage said in a conference call that circumstances have forced Preview Systems to look for a bigger home for its products. The company is in negotiations toward that end, he added.

"Significantly larger companies than Preview have begun to assemble" competing products, Pluvinage said. "Under these circumstances, our know-how and intellectual property can best be leveraged in a broader setting."

The company declined to give any details on which companies it is negotiating with, or what parts of its business might be the subject of talks.

More immediately, the company said it would lay off 37 people, or about one-quarter of its staff.

Digital rights management (DRM) technology such as Preview Systems' puts protections around digital files--everything from songs to software--to prevent them from being copied without restriction through services such as Napster or Gnutella.

Although it has won some important customers, including most recently Japanese giant NTT, Preview Systems has been hurt by giants such as Microsoft, Intel and IBM moving into the DRM market

Although they have different takes on the anti-piracy market, all of these larger companies have recently expanded their offerings. Any of these could be viewed as potential buyers for Preview Systems' technology.

Pluvinage said his company has also been hurt by small companies that have failed to renew their contracts because of lack of funding or because they shut down their businesses.

Despite considerable attention in the press and analyst community last year, secure digital rights companies have struggled as consumers have flocked instead to free, unrestricted download services such as Napster.

Preview on Tuesday reported a fourth-quarter loss of $5.6 million, or 32 cents per share, excluding one-time costs related to acquisition and stock compensation plans. It said revenues for the quarter were $1.85 million. For the full year 2000, the company posted $7.7 million in revenues, winding up $17.9 million in the red excluding one-time costs.

The company also said it would take a $750,000 charge related to the staff reductions.

Preview's stock has plummeted from highs near $70 last March to around $2.50 Tuesday.