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Intraware slashes staff to survive

The company, which sells and manages software that lets businesses handle their IT assets over the Internet, lays off nearly half its work force.

Intraware laid off nearly half of its work force in a conference call Friday afternoon in a move to cut costs, an executive told CNET News.com.

Laying off the 180 people was essential to the company's efforts to reach profitability, said Mark Long, Intraware's executive vice president of strategic development.

About 200 people remain at the Orinda, Calif.-based company, which sells and manages software that lets businesses handle their IT assets over the Internet.

Intraware will also begin to close an office in Fremont, Calif., one of its three locations in the San Francisco Bay area, while consolidating the remaining employees in Orinda and Emeryville facilities. Cutbacks will be made through all departments.

"This is saying we have to conserve our cash. This will make a dramatic impact on our move to become cash-flow positive," said Long, who expects the company to achieve profitability by early 2001.

"We'll be able to cut $5 million in operating expenses per quarter as a result of these reductions," he said.

Since the company's public offering in February 1999, it has changed its revenue model to improve profit forecasts. Previously, Intraware focused on reselling software to companies, but the prospect had relatively low profit margins. As a result, the company built up its software management services--a competitive, but lucrative business--to better compete in the marketplace. As part of the strategy, Intraware bought Janus Technologies in June in a stock deal worth $24 million.

But its sales staff held expertise in hawking products, not services, and entering this business proved difficult, sources said.

As a result, Wall Street has clobbered Intraware stock, which has lost about 96 percent of its value this year. Shares in the company, which have traded as high as $99, are now trading near their 52-week low of $2.62.

"It's been a struggle because we've gone through rapid growth, and we've been dealing with the adoption phase of new services with these big companies," Long said.

"But we are confident that we can achieve our long-term goals," he added. "The setback is more a function of the need to become cash-flow positive in the near future as opposed to an underlying weakness in our business."

Intraware will take a one-time restructuring charge in its fourth quarter as result of the layoffs.