Quokka cuts 90 employees, citing redundancies

The online sports producer lays off about 20 percent of its staff in a belt-tightening measure following several acquisitions this year.

Stefanie Olsen Staff writer, CNET News
Stefanie Olsen covers technology and science.
Stefanie Olsen
3 min read
Quokka Sports laid off about 20 percent of its staff Wednesday in a belt-tightening measure following several acquisitions this year.

The layoffs, totaling 90 employees, are meant to increase efficiency and help the company reach profitability by early 2002, the company said. Quokka employs 370 people.

San Francisco-based Quokka, which began producing Web sites for extreme sporting events such as The Whitbread Yacht Race, attributed the cutbacks to redundancies in staff because of recent acquisitions. This year, the company branched into mainstream sporting events, such as Major League Baseball and college basketball, through its purchase of Total Sports and through a majority investment in Golf.com. The company also acquired MountainZone.com earlier this year.

"With our recent acquisition of Total Sports, we will now realize the full leverage of the synergies of our organization, especially the production efficiencies that our combined technology platforms produce," Quokka chief executive Alvaro Saralegui said in a statement.

The buyout "has enabled us to achieve efficiencies in our work force, decrease facilities expenses and eliminate redundancies," he added.

As a result of the layoffs, effective immediately, the company will take a one-time restructuring charge of $1.8 million to $2 million in the fourth quarter.

The company's stock value has headed south, as have many Internet-related investments. Its shares have lost about 92 percent of their value this year. They also have been downgraded by Robertson Stephens and First Union Securities in the last two months.

"Anything advertising-based is out of favor, and anything that smells like technology is not very popular--that combination has whacked the stock," said Prudential Securities analyst Bill Lerner, who rates the company a "strong buy."

At the close of trading Wednesday, Quokka shares were up more than 27 percent at $1.75. Shares have traded as high as $18.75 in the past 52 weeks.

Quokka's faltering stock has affected recent deals. Earlier this month, the company completed its acquisition of Raleigh, N.C.-based Total Sports for about $33.8 million in stock. When the deal was announced in July, it was worth approximately $130 million, based on a share price of $8.81.

Despite the downturn, the company raised $76 million in September to bolster operations until it reached profitability. Investors included GE Capital, a subsidiary of General Electric; Accel Partners; Deutsche Bank; and DirecTV.

"The biggest issue for the company has been funding. But they received funding in September, and they now have the ability to reach profitability. It eliminates major risk here," said Lerner.

"The issues right see special report: Fired!now for Quokka are market-based more than fundamentals. They're going to be around, or they're going to be acquired," he added.

Quokka is in a superior position to other online media companies, Lerner said, because it secures much of its advertising revenue from longer-term sponsorships that are mostly signed by blue-chip advertisers including IBM and Intel.

Sponsorships also sweeten exposure for Quokka during periods between such prestigious events as the Olympics. Quokka and NBC have agreements to cover the Olympics through 2004.

Wednesday's restructuring included some management shifts, such as the promotion of Mark Ellis to vice president of revenues.

The company recently underwent other significant internal shifts. In late October, Quokka announced that chief operating officer Saralegui would replace Alan Ramadan as president and CEO.

Looking ahead, the company plans to increase sales efforts for future events. "Our business opportunities are robust," Saralegui said.