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Digital scanner maker lays off 110

DigitalConvergence, the innovator behind the CueCat digital scanner, lays off more than 44 percent of its staff in an effort to meet its financial goals.

DigitalConvergence, a maker of digital scanners, said Monday that it reduced its staff by about 44 percent as it looks for new financing.

The Dallas-based company laid off 60 full-time workers and 50 contract or temporary workers. Overall, the company had more than 250 employees.

The employees were notified of the layoffs at a meeting on Friday. DigitalConvergence would not comment on whether there were any compensation packages.

"We did it because we're in the process of going for another round of financing," company representative Peter Eschbach said. "The fact of the matter is that initially we were financed very well, but the intent was obviously for us to have been publicly traded by now...It's no secret the financial market makes it difficult to raise capital."

In March, the company pulled plans for an initial public offering, citing poor market conditions.

DigitalConvergence has been pushing its CueCat digital scanner, a mouse-sized device that allows consumers to swipe bar codes in print ads and find information about a product or service online.

Founded in 1998, the company drew criticism from privacy experts who said that DigitalConvergence's technology surreptitiously collected data on individuals. The company, however, has denied violating consumer privacy rights, saying it does not compile data that can be tracked back to a specific home address, phone number or e-mail address--although it does gather general, aggregated data based on gender, age and location.

While those issues have dimmed, consumers have yet to warm up to the CueCat technology despite licensing deals with numerous companies such as Forbes and Wired magazine. The company also has yet to prove its CueTV, a technology that acts like a remote control linking TV programming with the Web, which was launched last month with NBC.

IDC analyst Ron Glaz said the layoffs at DigitalConvergence were not a surprise given current market conditions, which have made staff reductions seem "a natural thing." In addition, he said, the company appears to be having problems getting people to use its products.

"It could just be a little belt-tightening or cleaning out some of the fat to make sure that they're able to survive the storm," Glaz said. "But considering the technology that (DigitalConvergence) has and how the market has not yet developed, I would estimate that part of their layoff has to do with the fact that they're not reaching their goals in terms of products shipments, revenues and so forth."