Stamps.com Cuts 40% of Workforce Following Net Industry Trend of Layoffs - TheStreet

Internet companies are laying off an increasing number of workers, according to a new study, and the latest round of job cuts came Monday at

Stamps.com

(STMP) - Get Report

, a postal service provider.

Challenger Gray & Christmas

, a New York-based corporate outplacement firm, reported 5,677 layoffs this month at the 274 Internet companies it follows, an 18% monthly increase from the previous month.

Stamps.com added 240 more lost jobs on Monday, as it moved to trim 40% of its workforce in an effort to cut costs by streamlining operations.

Trend to Continue

John Challenger, chief executive of Challenger Gray, predicted the situation would only get worse by year's end.

"The holiday season is going to be a critical time, since many companies are trying to stretch their capital to last into the holiday season to hit critical mass to get enough customers to become self-sufficient," Challenger said.

Other industry analysts agreed that some dot-com companies are facing tough choices ahead of the holiday season. "The funding for companies, that spigot, has been turned off, and companies are realizing they might not see any more money for at least six months," said Charlene Li, research director at

Forrester Research

(FORR) - Get Report

, a technology research firm. "No one is going to give out money until after the holiday season. It's just brutal out there. Every dot-com company is saying they're being very cash-conservative."

Since last December, Challenger said the e-tailing sector to which Stamps.com belongs has had the second most layoffs among dot-com companies with 5,450 cuts. Service providers, including consulting companies and financial services and information providers, have reported the most job cuts, with 8,113 since December.

The Internet health resource site

WebMD

cut 1,100 positions in late September. That announcement came a month after online health information provider

dr.koop.com

( KOOP), reported plans to

lay off one-third of its already anemic staff.

Even the popular portal

Altavista

, which is owned by the Internet incubator

CMGI

( CMGI),

laid off one-quarter of its staff in September and scaled back its operations.

Hard Times

Still, Stamps.com has suffered more than many of its peers.

The struggling Santa Monica, Calif.-based company has been without three top executives since the president and chief operating officer left the position to resume his primary role on the board of directors, and three others

resigned.

In the first two weeks of the month, Stamps.com announced that its chief executive, John Payne; its chief financial officer, John LaValle, and its comptroller, Candelario Andalon, would be leaving the company. Former U.S. Postmaster General Marvin Runyon has been acting as chairman until a permanent replacement is found.

Runyon tried to assure investors Monday that the company remained financially stable, and emphasized that the job cuts were part of an overall plan to help the company meet its profitability goals.

"Although we have nearly $300 million in cash reserves, today's competitive environment demands that we operate our business at maximum efficiency," said Runyon, in a statement.

Stamp.com's stock has lost about 97% of its value since last November's high of $98.50 per share. On Oct. 12, the stock hit a 52-week low of $2.31, and it has traded within a half-dollar of that price in the days since.

But the stock jumped after the layoffs were announced Monday, gaining 6 cents, or 2.3%, to close at $2.78.

Stamps.com still has a ways to go to convince investors that it is on the path to profitability. The company will report third quarter earnings Wednesday. Analysts say many investors will be waiting to see how the company does in the coming holiday season.

According to Forrester, about 16% of the dot-com companies that have announced layoffs this year have since failed.

"The market is holding people accountable now," Li of Forrester said. "It's no longer 'This is how fast we're growing' -- it's 'This is how well we're doing with what we have.' It's a good thing. There's some realism in the market now."