Posted at 9:20 a.m., Tuesday, May 01, 2001
Digital Island cutting 10 percent of staff
Advertiser News Services
Web-hosting firm Digital Island Inc. said today it plans to cut an additional 90 workers, or 10 percent of its staff, by June 30.
The planned action, which is part of a cost-reduction strategy, follows a previous 12 percent staff paring that eliminated about 113 jobs at the San Francisco-based company.
Digital Island will have about 805 employees after all of the reductions, a spokes-man for the company said.
Digital Island in 1999 moved its headquarters from Honolulu to San Francisco, where it maintains a private computer network for corporate clients that need to deliver multimedia information online at high speeds. Among its clients are J.P. Morgan Chase & Co., Compaq Computer Corp. and News Corp.'s British Sky Broadcasting network.
Additional cost-saving measures will include the consolidation of regional sites and removal of unprofitable circuits, the company said.
"Digital Island has moved quickly to bring expenses in line with revenues," said Ruann Ernst, the company's chairman and chief executive. "While the decision to reduce our work force is always difficult, our targeted reductions do not impact resources in the critical areas of innovation and customer growth and support. We have taken these decisive actions to ensure our business plan reflects current market conditions."
Ernst said the slowdown in both the economy and technology spending resulted in fewer new customers during the quarter, partially offset by strong recurring revenue from the company's top customers.
Digital Island also said today that Tom Thompson has resigned as chief financial officer, effective April 30, to pursue personal interests.
Addo Barrows, who is currently the company's treasurer, will assume Thompson's duties as interim CFO. The company said it has started a search for a new financial chief.
The company made the announcements as it reported quarterly and half-year earnings. For the six months ended March 31, revenues were $64.5 million, a 241 percent increase over revenues of $18.9 million for the comparable year-ago period.
The net loss for the six months ended March 31 was $145.5 million, before amortization of goodwill and other intangible assets, or $1.85 per share. The net loss for the six months ended March 31 was $1.3 billion including amortization of goodwill and other intangible assets, or $16.99 per share, compared with a net loss of $116.7 million, or $2.36 per share in the six months ended March 31, 2000.
The state Strategic Development Corp., which paid $450,000 for 315,000 shares of the company in 1997, has been able to reap some of the gains in the company's stock price before it sank. Among its sales, the state received $2 million from the sale of 24,400 shares in January last year at a price of about $100 a share. In September, it got an additional $150,000 through a stock sale at $30 a share.
Shares of Digital Island closed at $2.04 today on the Nasdaq Stock Market, down 43 cents.
