Acxiom Cuts Employee Pay to Avoid LayoffsDatabase marketing company Acxiom Corp. recently told its 6,000 employees that it is cutting the paychecks of anyone earning more than $25,000 per year by 5 percent.
Acxiom, Little Rock, AR, told employees that the cuts were implemented in an effort to trim costs and prevent massive job cuts.
"We wanted to maintain the motivation and excitement about our business at the same time we were cutting expenses," said Acxiom company leader Charles D. Morgan, who took a $140,000 pay cut, which is 20 percent of his salary.
In addition to employees earning less than $25,000, Acxiom employees working outside of the United States are also exempt. About 5,100 of Acxiom's 6,000 employees are affected by the announcement.
The company offset the pay cut with a stock option plan, under which the company gave workers affected by the cut the chance to buy shares that will be matched one-for-one by the company.
In addition, if an employee making more than $25,000 decides to take an even greater pay cut -- as Morgan did -- the employee could buy shares that will be matched two-for-one by the company.
Acxiom said it would announce later this week how many employees will take even greater pay cuts for the stock options.
Acxiom is one of the first companies to propose such a plan.
"To our knowledge, this is the only program with these elements," said Dale Ingram, an Acxiom spokesman. "In the last three to four months, there have been about 400,000 job cuts in general, and sometimes in these economic times, it is an easier decision just to cut jobs, but we feel our business will re-emerge, and the hardest thing to replace is the knowledge and talent of the people on our team."
Ingram added, "The [employee] response has been positive."
The move comes after Acxiom's most recent announcement that it anticipates revenue and earnings for the fourth quarter of fiscal 2001, which ended March 31, to fall below its expectations. Acxiom will release detailed financial information about the quarter May 15.
Acxiom expects fourth-quarter revenue to be $250 million to $260 million, delivering earnings of 10 cents to 12 cents per share, compared with the consensus of analysts' estimates of 36 cents per share.
Acxiom attributed the downturn to several factors, including a weak economic climate for technology and dot-com companies and a higher write-off of up to $35 million related to the Montgomery Ward bankruptcy proceedings. Originally, the write-off was $30 million. Montgomery Ward was an Acxiom customer.
"While fundamentally strong, Acxiom has not been immune to the severe economic downturn in the United States," Morgan said. "Our customer base represents some of the finest and most respected companies in the world, but they are aggressively cutting expenses based on the current economic climate.
"In a quarter when we normally expect more purchases and projects to be completed as companies launch their new fiscal years, we have recently seen many of our clients postponing these large purchases and major projects. As a result, many new sales opportunities were delayed as late as the last week of the quarter."
Acxiom, however, reported continued strong sales of AbiliTec, its customer data integration software. Fourth-quarter AbiliTec sales are expected to exceed $30 million, bringing the fiscal year total to more than $100 million.
"Not only did we have another great quarter for our CDI software," Morgan said, "but the AbiliTec pipeline continues to increase. We remain convinced of the long-term success of AbiliTec, and we hope to soon close many of the AbiliTec sales that were pushed into the future."
The company also said it began an aggressive, broad-based cost-savings initiative in the fourth quarter that targets many major areas of expense, including advertising, payroll, travel and capital expenditures. In fiscal 2002, these initiatives are expected to produce $20 million to $30 million in expense reductions from current levels.
Acxiom said no work force reductions are planned.