Digitas Cuts 350 as Financial Picture Worsens

Digitas last week slashed 350 staffers from its worldwide workforce and issued a grim earnings forecast for the upcoming quarter.

The job cuts and profit warning came as the Boston-based interactive and direct marketing agency revealed woeful third-quarter results that included a loss of $45 million, far worse than the $5 million Digitas lost in third quarter of 2000. The shop posted revenue of $51 million for the quarter, compared with $76 million for the same period a year ago. Digitas shares of late have traded at $1.50-$2 on the Nasdaq exchange.

Digitas said it took a charge of $25 million for the third quarter to cover layoffs and restructuring; the 350 layoffs came last Wednesday, with 140 staffers losing their jobs in the agency’s Boston headquarters. Digitas chairman and CEO David Kenny said no further cuts are planned.

Kenny said about $100 million has been removed from the marketing com pany’s cost structure through layoffs and real-estate savings since the year began. Those moves, combined with the fact that Digitas has “virtually no debt” and $38 million in cash on hand (up $5 million from the second quarter), should enhance the shop’s long-term viability, Kenny said.

In the short term, however, fortunes continue to sag. Digitas said revenue in the fourth quarter will be $45-50 million, about $10-15 million less than the company’s original projection. In the fourth quarter of 2000, Digitas’ revenue was nearly $80 million. Kenny attributed the gloomy news to the global economy and the impact of the terror attacks on some clients—Delta Air Lines, Morgan Stanley and American Express—and their marketing budgets.

Earlier this year, Kenny sought a buyer, and sources said he talked with the Interpublic Group of Cos. “There’s no pressure to do anything right now,” he said.

Digitas’ competitors have also scrambled to stay competitive. IXL slashed 300 of 800 workers as it prepares to merge with Scient, while Agency.com shuffled executives and refocused on U.S. and European operations.