USi cuts more staff

Application service provider USinternetworking on Monday confirmed it has made another round of staff cuts as it reins in costs and continues to search for funding, in an effort to reach break-even by the end of this quarter.

The company did not publicize the cuts and declined to specify how many of its 850-strong workforce had been slashed, although it did say the cuts were "primarily in indirect functions."

"As we've discussed over the last several quarters, USi is not immune to the challenges facing companies as a result of the difficult macro-economic conditions," the company said in a statement to Network World. "Given the current economic climate, the company determined that it was prudent to implement a reduction in force."

USi, whose customers include Rand McNally, Hershey Foods and Liberty Financial, led the ASP market with $100 million in revenue in 2000, according to a recent report by research firm IDC. But the ASP has had its share of problems.

USi built its own data centers, leaving it with a heavy debt as its early venture-backed customer base eroded and it sought to establish its business with larger enterprises. The firm received a cash infusion last fall when Microsoft, GE Capital and others invested more than $300 million in USi.

But in its second quarter earnings report in July, CEO Andrew Stern said the company was actively looking for more funding "to replace credit lines and standby equity and to fulfill our needs in 2002." Some analysts suggest USi might be ripe for a merger or acquisition.

Still, a spokesman for the company retirated USi's plan to go it alone and reach EBITDA (earnings before interest, taxes, depreciation and amortization) by the end of this quarter. Last quarter, the company reported a net loss of $51.5 million on revenues of $32.2 million. It also reported $34 million in new bookings, signing contracts with companies such as Blue Cross and Blue Shield of Michigan and GMAC Commercial Holding Company during the second quarter.

The job losses follow earlier cost-cutting efforts at USi. The firm announced it would lay off 150 employees in January and another 250 in April.

Contact Senior Writer Jennifer Mears

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