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Update: StarMedia to Cut 15% of Workforce

The move would enable the company to record a profit in the fourth quarter of 2001, a year earlier than expected.

Updated from 5:27 p.m. EDT

In pursuit of profitability,

StarMedia Network

(STRM) - Get Streamline Health Solutions, Inc. Report

, an Internet media company, said Wednesday that it planned to cut 15% of its staff and take a one-time charge of $2 million to $4 million in the third quarter of this year.

The realignment, which calls for the elimination of 125 jobs, is expected to generate savings of $15 million to $20 million in 2001, StarMedia said.

The news, announced after the market closed Monday, comes after months of steady growth. The company has made 10 acquisitions in the past year.

StarMedia, a New York-based company that aims at Spanish- and Portuguese-speaking audiences around the world, also emphasized that the move would enable it to record a profit in the fourth quarter of 2001, a year earlier than expected.

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Gordon Hodge, an analyst at

Thomas Weisel Partners

in San Francisco, applauded the reorganization, saying it was a natural result of the company's aggressive acquisition spree.

"It seems to be a proactive move to accelerate profitability that we had hoped would be there," he said. Hodge had initially expected a profit in late 2002, but said StarMedia's optimistic projection announced Wednesday was a reasonable one.

StarMedia's stock, well off its 52-week high of $61, fell 50 cents, or 4%, Wednesday, closing at $11.50. The shares slipped to $11.25 in after-hours trading, according to



"Today's announcement is the culmination of a six-month process geared toward creating a more efficient StarMedia," Fernando Espuelas, chairman and chief executive of StarMedia, said in a statement. "The fundamentals of the business are sound, and our strategy has not changed."