Tuesday, January 9, 2001
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Posted on: Tuesday, January 9, 2001

Layoffs hit online units of non-Net firms

USA Today

Internet layoffs aren’t just for the dot-coms anymore.

Saddled with work forces built during the "get online at any cost" days, bricks-and-mortar companies and firms created before the Internet boom are now slashing employees at dot-com units.

Those in the latest round of Internet bloodletting yesterday include J.P. Morgan Chase’s Morgan Online, Cambridge Technology Partners and discount broker Ameritrade. These come days after similar cuts at the online units of both the New York Times and News Corp.

Traditional firms, not just dot-coms, overestimated how fast online businesses could grow, said George Stalk, senior vice president of Boston Consulting Group, adding that the slowing economy is hitting the new economy.

"If your assumptions are too high, you need to make painful downsizing decisions," Stalk said.

Stalk expects more traditional firms to lop heads at online units as investors want these firms to stick to their core businesses while the economy slows.

None of the firms is dropping its Internet plans. But they’re retrenching:

Morgan Online slashed 150 workers, or about half its staff, but mainly in marketing and sales, said spokesperson Mary Sedarat.

The cuts won’t hurt the unit because it doesn’t need to advertise as aggressively as it did after being formed in March, she said. It inherited many clients with between $1 million and $5 million to invest after J.P. Morgan was bought by Chase Manhattan, she said.

Together, the company has a pool of 65,000 customers that Morgan Online can be offered to. That’s cheaper than trying to find new customers from outside.

The New York Times is cutting 69 jobs, or 17 percent of its online unit’s work force, in functions from marketing to editorial.

The cuts are necessary because New York Times Digital increased staff in the third quarter of 2000, expecting online advertising to boom, said Rudolf Hokanson, analyst with CIBC World Markets. That boom turned into a bust.

Cambridge Technology Partners, a 10-year-old consulting firm, laid off 280 workers, or about 7 percent of its work force. Most of the cuts came from the e-business unit, which generates about 63 percent of the company’s revenue. The company still thinks e-business will continue to be the future, said spokesman Patrick Mooney.

Some caution old-line firms from being too rash in cutting back Internet businesses.

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