August 28, 2001 4:45 PM PDT

Dot-com failures rise as layoffs decline

Although the number of failed dot-com companies rose in August, the number of actual job cuts dropped to a 12-month low, according to a report released Tuesday.

Twenty-one companies shut down, up from nine closures in July, according to the report by outplacement company Challenger, Gray & Christmas. Online currency company Flooz.com, DSL provider Covad Communications Group and online software retailer Egghead.com were among the Internet-related companies to announce plans to file for bankruptcy protection in August.

August's 4,899 layoffs represent a 44 percent drop from July's layoffs.

"I think we are near the final chapter of the dot-com shakeup," said John Challenger, chief executive of the Chicago-based company. "I think those getting laid off now are higher-level executives or core people."

Challenger said he expects the layoffs to continue to wane for the rest of the year, but will likely spike in December and January--months that traditionally have seen a high number of layoffs in all industries as companies re-adjust their budgets for the coming year.

Portals made the steepest cut among the dot-com companies in August, slashing 1,700 jobs. That sector was closely followed by Internet companies that provide the behind-the-scenes nuts and bolts, which cut 1,117 jobs.

Both sectors have led in job cuts for the past several months, and Internet infrastructure companies may take the lead in the near future, Challenger noted.

"Infrastructure companies were insulated because they worked with so many companies across the dot-com industry and that gave them a wider base of revenues. But now infrastructure companies are beginning to face the same issues as the niche companies," Challenger said.

 

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