24/7 Media Expects to Lose up to $157M in Fourth Quarter
The New York-based online advertising services provider said all but $5 million to $7 million of the loss would be from non-restructuring charges as it moves to eliminate redundancies and achieve cost savings. 24/7 Media Inc. already has dismissed 200 employees worldwide, a company spokesman said, including some in senior sales positions.
For the fourth quarter ending Dec. 31, 24/7 Media said it expects to lose between 39 cents and 44 cents per share on revenue of $48 million to $55 million. A year ago, the company reported a fourth quarter loss of $13 million, or 58 cents per share.
Brian Bartholomew, an analyst at Banc of America Securities, said most online ad networks will struggle to post improved revenues in the fourth quarter. He also noted that many of these companies may post numbers below their already revised forecasts.
"We continue to forecast a difficult environment in coming months for e-mail marketing service providers, particularly those with heavy exposure to dot-com clients and those that tend to focus on customer acquisition [as opposed to customer retention]," Bartholomew said.
In a statement, 24/7 Media said it is "aggressively raising cash" to meet its long-term objectives and will "continue to be opportunistic" in its sales of non-core assets. The company spokesman would not say which non-core assets may be cut.
Dana Serman, an analyst at Lazard Freres & Co. LLC, said while it is no surprise that 24/7 Media announced an earnings shortfall for the fourth quarter, he finds its tenuous cash position more troubling.
"The real issue is their cash detriment," Serman said. "To what extent are they in a cash crunch?"
The company said it already raised more than $18 million in cash, primarily through the sale of non-core assets such as their holdings in the Chinadotcom Corp. Web site.
"They need to monetize their stock holdings," Serman said. "They are in a tough bind."
Serman said 24/7 Media has two options: find additional financing or become profitable.
"They can probably become profitable by cutting low-end sites and less profitable ad-serving clients," the analyst said. "But it's unproven if a downsized business model can be profitable."