Citing a slowing economy and soft online consumer market, Network Commerce yesterday conducted its third round of layoffs in four months, announced plans to shut down its consumer shopping site and downgraded its earnings forecasts for the coming year.
The Seattle company said it would lay off 145 employees, many of whom worked for its ShopNow.com division and for The Haggin Group, its San Francisco-based direct-marketing business that closes this month. Other cuts were made companywide, with 445 employees remaining.
The company plans to close its best-known business, ShopNow.com, a Web site where consumers may purchase products from perfume to tax software.
Chief Executive Dwayne Walker would not disclose how much of the company's revenue came from ShopNow.com but said Network Commerce will focus on building its technology infrastructure and services business, which sells Web addresses, Web hosting and Internet-commerce services to businesses.
Walker said its technology-services division is less costly to run than ShopNow.com, which required advertising and marketing dollars to lure and keep shoppers. The company's goal is for the division to grow this year into the source of 40 percent of Network Commerce revenue.
"It will allow us to operate on a higher gross margin," Walker said. "We will generate a lot more cash flow for the company."
Network Commerce, whose stock has lost 94 percent of its value since March, has been on shaky ground for several months.
The company cut 68 positions in October, 85 more in December and recently scrapped plans to lease most of the Metropolitan Park North tower, which is being built in downtown Seattle by Benaroya Capital.
Those moves have come into sharper focus with the company's warning that it will miss analysts' estimates.
The company said it expects to post a pro forma net loss of $24 million to $27 million for the fourth quarter, or 39 to 43 cents a share, based on the number of outstanding shares. That's almost double the 22-cent-a-share loss expected in an analyst poll by First Call/Thomson Financial.
Walker said the cuts were necessary to stay on course in the face of a slowdown in the economy and Internet sector.
The changes, he said, will allow the company to post a pro forma profit in the third quarter of 2001 and reach cash-flow profitability in the following quarter.
"The consumer shopping arena hasn't been as strong as we'd like to see it be," Walker said.
"It simply isn't growing at a rate that would meet our expectations from a financial point of view."
The company's shares yesterday closed up a modest 9 cents to $1.31. Network Commerce is to announce fourth-quarter earnings Monday.