USi lays off 11% of workforce

Application service provider USinternetworking on Tuesday announced it will lay off 150 employees, or about 11% of its workforce, in what it says is a move to profit from a reorganization that has allowed the company to operate more efficiently.

Company executives say the staff reductions will not impact client service levels or future growth. The cuts are in response to a slowing economy, but will be implemented in areas where "increasing efficiency and organizational realignment have created excess capacity," the company said in a statement.

USi got a boost in November with more than $300 million in financing from a range of investors, including Microsoft. That investment is helping USi as it deals with losses stemming from the erosion of its early, venture-backed client base. The ASP says those companies represent about 7% of its backlog for 2000. Total backlog is expected to be about $104 million at year-end.

USi announced the layoffs along with other fourth quarter news, including expectations that revenues for the quarter ended Dec. 31 would be approximately $37 million and that losses would total about $12 million.

Andrew Stern, USi's CEO, says the ASP remains healthy and notes that it secured 33 new clients during the last quarter, including Magellan Health Care and Polyclad Technologies, a Cookson Electronics company. He says enterprise clients will be a big target for USi in 2001.

USi's decision to cut staff is in line with analyst projections that 2001 will be the year that ASPs will have to prove their value by conserving their capital and laying out a plan towards profitability.

USinternetworking: www.usinternetworking.net