Engage warns of 1Q shortfall; CEO resigns

Engage became the latest online advertising firm to disappoint its investors Wednesday when it warned that it will post a wider-than-expected loss in its first quarter and announced that its CEO is jumping ship.

Engage (Nasdaq: ENGA) said that it now expects to lose around 25 cents a share in the quarter on sales of between $40 million to $42 million.

First Call Corp. consensus expected it to lose 20 cents a share in the quarter.

The revised sales figures will result in a dramatic sequential decline from the fourth quarter when it posted a loss of $23.9 million, or 14 cents a share, on sales of $66.7 million.

Company officials said weak demand from Internet advertisers, an oversupply in the media market and a longer-than-expected sales cycle for its software business contributed to the sales shortfall.

More disturbing, company officials said it expects the slowdown to continue for the next few quarters.

"We believe many of these conditions could persist into the next three quarters," said CFO Bob Bartlett in a prepared release. "We believe we can achieve modest quarter over quarter growth throughout fiscal 2001, with total revenues anticipated to be in excess of $200 million."

Earlier Wednesday, 24/7 Media (Nasdaq: TFSM) posted a wider-than-expected loss in its third quarter and announced it would lay off 200 employees as a result of the flagging online advertising market.

Separately, Engage said that Anthony Nuzzo will take over the chief executive post from Paul Schaut, who will resign effective Nov. 20.

Last quarter, Engage announced that it would consolidate its five business divisions into two and shed 175 employees, roughly 13 percent of its workforce.

Engage shares moved up to a 52-week high of $94.50 in March before falling to a low of $3.19 earlier this week.

Seven of the 10 analysts following the stock rate it either a "buy" or "strong buy" recommendation.