Digitas Announces Staff Reduction

Digitas on Tuesday announced its first layoffs since the agency made its initial public offering a year ago.

The shop said it cut about 3% of its staff — 65 people — in an effort to save $5-7 million this year and $8-10 million in subsequent years. Expected real estate expansion in the shop’s Boston headquarters and its New York office has also been halted. Digitas expects to take a one-time charge of $8-12 million in the second quarter of 2001 as a result of these actions.

In addition, the company announced a temporary 5% pay cut for its 70 highest paid executives.

“Reducing our cost structure will help ensure that we maintain cash profitability,” said Digitas CFO Jeff Cote.

The moves were made due mainly to offset budget cuts made by several key clients. Client spending is down an average of 10%, according to Cote.

The shop had for the most part managed to avoid the financial hardships–and subsequent cutbacks–of competitors such as marchFirst, iXL and Razorfish.

Also on Tuesday, Digitas reported a net loss of $6.6 million for its first-quarter ended March 31, an improvement compared with the $7.5 million loss it reported for the same period a year. First-quarter revenue was $77 million, a 22% increase from the same period a year ago.

Digitas recently added interactive chores from FleetBoston and Bestbuy.com. The company’s stock has been trading on the Nasdaq in the $4-6 range in recent weeks.