CMGI's Engage Takes Another Step on Profitability's Path - TheStreet

CMGI's Engage Takes Another Step on Profitability's Path

The ad concern says it will cut 175 jobs.
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CMGI

(CMGI)

, the song remains the same.

Engage

(ENGA)

, the Internet incubator's majority-owned advertising subsidiary, said Wednesday evening that the firm is reducing its workforce by 13% and consolidating its five operating divisions to two.

The announcement came as Engage announced financial results for the fiscal fourth quarter ended July 31. Though not all business trends were positive, the company beat analysts' earnings estimates, and it said it would be profitable nine months ahead of analysts' current target, without any need for additional financing.

Engage's streamlining news comes two weeks after CMGI said it is

reorganizing its lines of business with an eye to speeding up its eventual profitability. And it comes less than a week after another CMGI subsidiary,

AltaVista

, said it was

laying off 25% of its staff as part of a strategic refocus.

CMGI itself is slated to report fiscal fourth-quarter earnings after the market's close Thursday, at which time the company says it will start reporting the individual financial performances of six different lines of business.

Ahead of the earnings call and the consolidation news, Engage's stock fell 44 cents, or 5.2%, to close at $8.06.

For the quarter ended July 31, Engage reported cash earnings -- excluding amortization of goodwill and other intangible assets, stock compensation, in-process research and development and acquisition costs -- amounting to a 14 cent-a-share loss, better than the

First Call

consensus of a 28-cent loss and near the prior year's loss of 13 cents per share.

Revenue amounted to $66.7 million for the quarter, up from $16.5 million one year earlier. The company noted that $13 million of the latest quarter's revenue came from

Compaq

(CPQ)

, an Engage shareholder, in a deal that was announced only two days before the earnings call.

CEO Paul Schaut says the company, which cut the rate at which it is burning cash, expects to achieve cash profitability by April 2001, three quarters earlier than expected.

On the down side, Engage said that the number of customers for its profiling technology, which enables advertisers to better target advertising at consumers who might be interested in it, dropped from 42 in the fiscal third quarter to 20 in the fourth quarter. The company said that it had lost dot-com clients for its flagship product, but that traditional off-line customers had moved in to test the technology.

The company's media revenue also declined from the third to the fourth quarter, amid the general slowdown in Internet advertising.