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Macromedia to cut workforce 10%

Faced with falling revenues and profits, Macromedia will lay off up to ten percent of its workforce.

3 min read
Multimedia authoring toolmaker Macromedia (MACR), faced with falling revenues and profits, said it will lay off up to ten percent of its workforce.

Fewer than 55 employees will lose their jobs, while others will be refocused on the company's emerging business plan, said company spokeswoman Mary Leong.

"There will be some layoffs and some employees will be set on a new path as the company refocuses its efforts of the Web. We have gotten to do the graphics and multimedia and now we want to do business on the Web and e-commerce," she said.

The layoffs come as the company expects to post a substantial fourth-quarter loss stemming from product delays.

"There will definitely be restructuring because expenses were too high in the past two quarters," Leong added. "We have to figure out what the best investment areas are and we will be consolidating in some cases to make those departments more lean and more effective."

The sales and marketing departments will be trimmed, while the company plans to expand in other areas, she noted.

Leong said the layoffs may be officially announced to the public as a plan to ease losses when the company releases its fourth-quarter results, a report that has tentatively been scheduled for April 30. Employees that are losing their jobs have already been notified.

And the layoffs don't come easy, according to Leong. "You need to make sure you are doing the right thing for the company and the shareholders. This is all attributed to growing pains. Once you go public, you have the responsiblity to keep growing."

Analysts agree that moving toward the Web is a good way to curb costs and get refocused on profitabliliy. "One of the problems that Macromedia had in the past is that their product distribution matrix was convoluted," said Dakin Securities analyst Edgar Bierdeman.

"The company needs to streamline its distribution model. It is much cheaper and more cost-effective to distribute software online. I think they are moving in the right direction," Bierdeman added.

Meanwhile, Macromedia earlier this month announced its fourth-quarter results were expected to get hit as a result of delays in releasing its Director 6.0 Multimedia Studio software. The release date was pushed back to June from March because of bugs in the software.

"We concluded that we would not be able to resolve all outstanding issues in time to deliver Director 6.0 consistent with our high-quality standards by the end of the month, and therefore decided that it would be prudent to take some additional time," President Rob Burgess had said in a statement.

Wall Street was expecting the company to report net earnings of 2 cents a share, according to First Call. But following the negative preliminary statement, 7 of 11 analysts that follow the company adjusted their expectations downward for the March quarter to an average loss of 19 cents a share, according to Chuck Hill, a First Call spokesman.

Macromedia's fourth quarter will mark the second consecutive quarter the company has posted a surprise loss. The software maker, facing stiff competition in the multimedia arena, has seen its revenues and profits fall for several months.

The company's stock plummeted in early January when it traded around $18 a share. The sell-off occurred after the company reported an unexpected third-quarter loss of $2.4 million after cutting the price on its Authorware Interactive Studio software. Since the drop, the company has hovered between 7-1/2 and 9.

Bierdeman expects the company to be profitable in June quarter fueled by sales from its Director product, reduction in operating expenses, and cuts in general and administrative expenses.

(Bud Colligan, chairman of Macromedia, is a board member of CNET: The Computer Network.)