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Tech Industry

Scient cuts 460 jobs in restructuring

The Internet consulting company lays off about 25 percent of its staff and will close offices in two U.S. technology hot spots in a move to lower its costs.

In another setback for the Web services industry, Scient said Wednesday it cut about 460 jobs in a restructuring effort to lower costs.

The layoffs, which were effective immediately, amounted to about 25 percent of Scient's staff. In addition, company executives said Scient plans to close its offices in Silicon Valley and in Austin, Texas.

The San Francisco-based company also lowered its earnings expectations and revenue expectations for the third quarter, "given the rapid change in the e-business market," the company said in a statement. Scient attributed the cutbacks and revenue shortfall to a wider economic slowdown causing shrinking budgets at dot-com companies and increased competition in the services market.

"The combined effect of these market factors has required swift, corrective action," chief executive Bob Howe said in a statement.

"We believe the actions we are taking will better align our capacity with current market demand," he said. "While we continue to manage through the market transition, we believe the long-term e-business opportunity is very attractive."

The layoffs at Scient are the latest to hit a company in the Internet services industry. Tuesday, Web consultancy Xpedior announced plans to close several offices and trim nearly 32 percent of its staff. Last week, iXL Enterprises said it would lay off about 850 employees, close or sell seven offices, and liquidate selected assets to turn around its ailing business.

Others in the industry, like MarchFirst and Razorfish, have also been hit by investor ennui and deflating demand for Internet business services.

Scient's shares have lost nearly 95 percent of their value this year. They are trading near their 52-week low of $4, well off a high of $133.75 reached earlier in the year.

The company now estimates its third-quarter revenue will be $80 million, with professional services margins about 50 percent, Scient said. Prior analyst projections were about $112 million. Scient, which now employs about 1,400 people, is projecting a pro forma operating loss of about $13 million, or 16 cents a share, before one-time restructuring charges of between $40 million and $45 million.

"The actions we are taking to reduce our costs are expected to generate savings of approximately $60 million in calendar year 2001," chief financial officer Bill Kurtz said in a statement.

"Our financial position remains strong and our cash balance should approximate $150 million at the end of the December quarter. We remain committed to our goals of generating positive operating cash flow in fiscal year 2002 and long term operating margins in the 15 percent to 20 percent range."