May 11, 2000 6:50 PM PDT

AltaVista latest to resort to layoffs to trim costs

Following a string of companies cutting staff in recent weeks, AltaVista has laid off 40 employees in an attempt to save money.

The job cuts represent about 5 percent of the Web portal's work force and come a month after the company postponed its initial public offering. The types of jobs eliminated varied and affected departments throughout the Palo Alto, Calif.-based company, according to AltaVista spokesman David Emanuel.

"This is part of a calculated plan to control expenses and accelerate our path to profitability," Emanuel said. "There's been a fundamental shift in e-commerce--a return to fundamentals and profitability--and we are committed to providing both."

Analysts predicted that many Net sectors would be pruned this year. So far, a slumping market and fierce competition have spurred some Web companies to begin scaling back operations or to seek mergers. Others, such as online grocer Peapod, health Web site Drkoop.com and music retailer CDNow, have come perilously close to going out of business.

Among those cutting staff, KBkids.com announced yesterday that it fired 45 of its 145 employees, reducing its work force by 30 percent. Linux start-up Linuxcare, online retailer Skymall.com and Quepasa.com, a Web community aimed at Spanish-speaking Net users, also have announced layoffs.

The scramble for cash among smaller Web companies comes as portal front-runners Yahoo, America Online and Microsoft's MSN appear to be growing their already large shares of the market.

Forrester Research said that the giant Web portals saw 15 percent of all Web traffic during 1999, while the remaining portals--Lycos, Excite@Home, Go.com, NBC Internet and AltaVista--combined for 5 percent of Web traffic. Forrester predicts that the top three portals will gain even greater market share in the future.

Though AltaVista is one of the oldest Internet companies, it has yet to earn a profit. In documents filed with the Securities and Exchange Commission in February, as of Dec. 31, 1999, the privately held company had accumulated $272 million in losses while generating $50 million in revenues.

Besides the layoffs, AltaVista said it has no intention of implementing further cost-cutting measures.

The company said it will continue to spend money on new ventures and on acquiring customers. It announced today that it plans to begin offering free Net access across Western Europe sometime by the end of the year. Last week it unveiled a new search engine, and it is in the midst of a $120 million advertising campaign launched in October.

"We are still investing and will continue to expand our business," Emanuel said. "We will continue to offer our Web-savvy users premier services, but it's going to be done with an eye on profitability."

AltaVista is 83 percent-owned by well-heeled investment firm CMGI, with Compaq Computer owning the remaining 17 percent.

Emanuel said AltaVista could reach profitability by the end of the year.

 

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