Atlanta-based Healtheon/WebMD this week started cutting an undisclosed number of employees. In addition, B2Bstores.com, a Long Beach, Calif., company that sells office supplies and other products online, said it would lay off employees as part of a company reorganization.
Healtheon, which connects doctors, patients, insurers and medical labs online, said its cuts were part of an effort to slice $75 million from its projected $1 billion in expenses this year. The company expects to lay off more staff in the coming months, according to chief operating officer Steve Grant.
The layoffs at both companies indicate that the recent slump in the Internet sector is not limited to e-tailers. Although Healtheon offers a consumer service, most of its revenue comes from working with hospitals, doctors and insurers to streamline medical administration processes.
Some analysts say business-to-business is still robust, but that some companies are tightening their belts to ride out the rocky business climate.
Healtheon "has made a number of acquisitions and is looking for synergy," said Daren Chervits of investment adviser Jacob Asset Management. "As far as the market goes generally, I don't think the pressure on B2B companies has been the same as B2C companies. B2B companies have cash on the table, and because the Internet sector is going through some tough times, it makes sense for companies" to streamline.
Until recently, many companies in the business-to-business sector were the darlings of Wall Street. Even as investors began to cool to business-to-consumer companies, business-to-business companies drew a large percentage of venture capital in the early part of this year.
But even business-to-business stocks, such as Ariba, Commerce One and i2 Technologies, have lost value in the past few months along with the rest of the industry. Shares of both Healtheon and B2Bstores are way off their 52-week highs.
Grant said Healtheon's decision to cut staff has little to do with market pressures.
"We're doing something very natural for a company that has made a number of acquisitions," he said. "We're trying to eliminate duplicate resources." He pointed out that the company remains strong financially and has $1 billion in the bank.
B2Bstores said its cuts are part of a wider restructuring that will include a significant reduction in the company's monthly costs.
The business-to-business company said chief technology officer Jeffrey Crandell and executive vice president of business development Shannon Jessup have resigned. Two members of its board of directors also have departed.