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Net consultancy US Interactive warns on revenues, cuts staff

Embroiled like its rivals in a shifting market, the Net consulting company expects revenues to drop from second-quarter levels to between $21 million and $23 million.

US Interactive today said it will not meet third-quarter revenue expectations and plans to cut its job force by 15 percent.

The news sent shares of the company sliding. Shortly after the opening bell, shares of US Interactive fell 69 cents to $3.31, shedding 17 percent of their value, and leaving them well below a 52-week high of $92 per share.

The Philadelphia-based company, which provides clients with Internet strategy, development, marketing and creative services, said it expects revenues for the third quarter ending Sept. 30 to be in the range of $21 million to $23 million. The expected figures are more than double the revenues of $9.9 million in the same period a year ago but below the $29.5 million reported in the second quarter of this year.

The company did not disclose its earnings-per-share projections, but analysts polled at First Call/Thomson Financial expect US Interactive to post a loss of 3 cents a share. Last quarter, the company reported a loss of 6 cents.

US Interactive, which competes against Scient, Viant, Breakaway Solutions, Razorfish and others in the Internet consulting sector, said it will focus on a new strategy of helping clients with their online customer management needs, on top of the services it already provides. At the same time, it will reduce its staff by approximately 15 percent and carry out cost-cutting efforts in the area of general, administrative and other expenses that are not crucial to its new strategy.

Founded in 1994, US Interactive employs about 825 people.

The company is the latest in a string of Net consultants that have recently issued financial warnings as a result of an overall market shift from serving dot-com clients to focusing on more traditional, established companies with deeper pockets. The trend, analysts say, means companies will see slower revenue growth because projects will take longer to complete.

San Francisco-based Organic recently pruned its third-quarter revenue outlook, citing similar issues. It expects third-quarter revenue to grow about 5 percent from the $37.2 million posted for the second quarter of 2000, less than expected.

Another rival, Atlanta-based iXL Enterprises, recently saw its shares take a beating after warning that revenues for the third quarter will be 15 to 20 percent below the $119.2 million reported last quarter. iXL, which recently announced the departure of president William Nussey, is also eliminating about 350 consulting and technical-support jobs.

US Interactive has appointed Mohan Uttarwar to head its sales, marketing and technology initiatives. Previously, Uttarwar was president of the company's subsidiary, US Interactive Corp.

Earlier this month, the company announced the departure of former chief executive officer and president Stephen Zarrilli, who left to pursue other business ventures. William Jennings, formerly a partner at PricewaterhouseCoopers, was recently named US Interactive's new chief executive.