Sunday, June 18, 2000
Dot-coms under pressure with no money, employees
Analysts predict more pink slips
By Cliff Edwards
The Associated Press
PALO ALTO, Calif. — Alta-Vista chief executive Rod Schrock steps into his office, his face bearing the strain of the turmoil in the Internet industry.
After rapidly expanding last year and pouring millions into advertising, AltaVista in the past few months has laid off 50 of its 800 employees, reassigned 60 and admitted defeat in an effort to dethrone Yahoo! as the world's leading Internet search engine.
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CYBER-HURTING
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An alphabetical list of some digital-economy companies that have laid off workers since December:
• AltaVista; online search engine, 50 of 800 workers.
• APBNews.com; online news company, all 140 employees. Ceased operations.
• Boo.com; online retailer, 400 employees. Ceased operations.
• CBS; Internet news division, 24 of about 100 workers.
• Corel Corp., software maker, 320 of 1,180 workers.
• Craftshop.com; CMGI-backed online craft toy store, undisclosed number. Ceased operations.
• Digital Entertainment Network; teen entertainment, 200 employees. Ceased operations.
• Epidemic Marketing Inc.; software that allows graphics and advertising in e-mail messages, 60 workers. Ceased operations.
• HealthShop; online natural-health products store, 60 workers. Ceased operations.
• InsWeb; online insurance, 120 of about 260 workers.
• J.D. Edwards, enterprise software, 800 of 5,800 workers.
• KickStart; online fund-raising service, 20 of 46 employees.
• Load Media Network; software company that lets PCs download high-quality video, 42 of 97 employees.
• MarchFIRST; technology consulting company, 260 of 9,000 workers.
• Petplace; veterinarians information site, 19 of 27 workers.
• PlanetOutdoors.com; online retailer of outdooor gear, 22 of 100 workers.
• Quepasa; Spanish-language portal, 30 of 90 workers.
• Red Rocket; Viacom-backed online seller of educational toys, undisclosed number. Ceased operations.
• Reel.com; online unit of Hollywood Video, 200 workers, closing e-commerce unit.
• Salon.com; online magazine, 13 of 140 workers.
• Sony Online Entertainment; gaming Web site, all 60 workers in Los Angeles office.
• SurfBuzz.com, Internet portal and auction site, unknown number of workers. Ceased operations.
• Toysmart; Disney-backed online toy store, 170 employees. Ceased operations.
• Violet.com; online boutique, undisclosed number of workers. Ceased operations.
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A shakeout is taking place among the dot-coms. At many companies, stratospheric stock prices are falling back to Earth, and financing is drying up. Instead of dispensing stock options, many are handing out pink slips.
“Frankly, my view is the Internet industry, the craze around the Internet, ultimately caused unhealthy behavior,” Mr. Schrock says, his eyes red-rimmed from a long week of strategy reviews. “That behavior was: "Focus on acquiring an audience at all costs, regardless of costs.'”
The list of troubled businesses is long: Value America, DrKoop. com, KBKids.com, Quepasa.com, Petplace.com, Petstore.com, CarOrder.com, Salon.com, Turbo-Linux. Even Amazon.com — viewed as one of the most stable Web companies — is cutting the fat.
“The first phase of the Internet, characterized by little more than exuberance and an uncertainty about what the industry was going to look like, is coming to an end,” says John Challenger, chief executive of Chicago-based job-placement company Challenger, Gray & Christmas.
“Now we're moving into the second phase of the digital revolution, where we're going to sort out the companies that don't produce. There's no doubt you're going to see a summer littered with dot-com layoffs.”
PlanetRx.com, Autoweb.com, Buy.com. CDNow, Drugstore.com, Egghead.com, Fogdog.com, Garden.com, HomeGrocer.com and Streamline.com are among those that will run out of money in the next 12 months unless they get more funding, Goldman, Sachs & Co. analyst Anthony Noto said last month.
Forrester Research went even further in the gloom-and-doom predictions category, saying most dot-coms will go out of business by 2001.
Among the first were London retailer Boo.com, New York news agency APBNews.com and, just in the past week, Reel.com.
At AltaVista, Mr. Schrock chafes at being lumped in with those companies. He says chief stakeholder CMGI remains committed to seeing AltaVista through its makeover, despite stock turmoil that forced Alta-Vista to postpone indefinitely its initial public offering.
The company is now positioning itself as a “Web-wide knowledge resource” that allows people around the world to search for comprehensive information on a topic before going to a partner site to buy or get specific information. It is also licensing its search technology to other e-commerce sites, an arrangement that accounts for nearly 15 percent of its annual revenue.
“Venture capitalists have closed the golden doors right now, but we're backed by a company that has $500 million in cash,” Mr. Schrock says. “They're fully prepared to help us develop in the long-term.”
What are the prospects for the laid-off employees?
Challenger and other job-placement services say the high-tech industry is still scrambling for qualified employees in a tight labor market. Some executives report they comb the Internet and papers looking for dot-com failures in hopes of being the first to snap up laid-off employees.
Other laid-off workers are taking a new look at traditional brick-and-mortar companies that are now expanding online.
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