NaviSite wields the layoff hatchet
The Web hosting company plans to cut 7 percent of its work force, becoming the latest CMGI-affiliated company to tighten its belt during the lean times that have rocked the Internet sector.
"People are looking for profitability," said Alex Arnold, an analyst at Adams, Harkness and Hill. The layoffs are "definitely a positive if they can improve profitability without hurting performance."
The Andover, Mass-based company, which provides businesses with Web and application hosting services, will lay off 44 employees by closing regional sales offices in Austin and Chicago, the first staff cuts in its four-year history.
NaviSite will also consolidate staff in its product development group, and cut back on other operating expenses.
NaviSite's 11 remaining offices will take over the territory once covered by the defunct sites.
The news is part of a stream of cost-cutting measures taken by CMGI, which owns a majority stake in NaviSite.
During its glory days, CMGI started Internet companies then reaped massive rewards from high-flying initial public offerings. But the company's fortunes have curdled along with investor enthusiasm with Internet stocks.
Last month CMGI, citing unfavorable market conditions, pulled its IPO for Web portal AltaVista, which then announced layoffs a few days later.
In its quest to squash costs, CMGI plans to cut its stable of 17 majority-owned operating companies to about five to 10 by the end of the fiscal year, an action that has resulted in the closing of iCast, and widespread layoffs at Engage.
NaviSite's business is still tied to CMGI in many ways, although the company is taking steps to become more independent.
In the fiscal first quarter ending last October, 42 percent of the $26 million revenue came from companies in which CMGI owns an equity stake. That compares with 43 percent in the previous quarter and 58 percent in the year-ago quarter.
But the company still has a lot of work to do. NaviSite "should continue to focus on the more profitable areas of the business market, and invest less in (research and development)," if the current lackluster market conditions continue, said Cynthia Houlton, an analyst at Dain Rauscher Wessels.
NaviSite plans to announce second-quarter earnings March 8.