Critical Path Sees 2Q Loss Grow to $81 Million
The company reported a net loss for the first quarter of just more than $70 million, or 97 cents per share, on revenue of $27.1 million.
David Hayden, executive chairman of Critical Path, said he remains optimistic that the company's restructuring will pay off.
"The restructuring and reorganization of the company that we began in April have begun to show measurable results," he said. "We have grown our core revenues while reducing overall operating expenses and are well under way in streamlining the company to its core business."
However, Critical Path's restructuring might not be paying off just yet. The company reported total core revenue for the second quarter of $20.7 million. That is up from $17.1 million in core revenue posted in the first quarter. But compared with core revenue of $24.3 million in second quarter 2000, Critical Path's plight is worsening. The company's core revenue rose steadily throughout 2000, only to begin a precipitous decline in 2001.
Core net revenue includes results from the company's hosted messaging, software licensing, professional services and maintenance and support businesses. In the second quarter, Critical Path said hosted messaging revenue fell to $6.7 million, from $7.1 million a year ago.
Despite the progress Critical Path made in the quarter, there is still much work to be done and many problems to solve, according to Jack Ripsteen, an analyst at J.P. Morgan Securities.
"We believe Critical Path still has many hurdles, besides its negative perception, to overcome, which include a challenging macroeconomic environment, more cost-cutting and internal personnel shakeup and legal overhang," he said.
Critical Path, San Francisco, said in April that it was refocusing its business to concentrate on its core e-mail messaging services and that 450 employees, or 43 percent of its staff, would be laid off. In the second quarter, the company laid off 212 people. It said another 130 are expected to be fired or will leave the company in the coming months. At its height, Critical Path employed 1,050 people.
The changes came as the company faces class-action lawsuits stemming from its announcement Feb. 2 that its accounting practices "put into question" its fourth-quarter 2000 financial results. It also faces an investigation by the Securities and Exchange Commission.
Critical Path said earlier this year that its previous management team had reported $13.4 million in sales that either never occurred or should have been recorded as revenue. An additional $5.9 million in revenue was taken off Critical Path's books and may be recorded in future quarters. The company reported a $1.85 billion loss for 2000.
At the end of the second quarter, Critical Path said it had $132.6 million in cash and equivalents, down from $171.6 million at the end of the first quarter.