*Engage Now Says It Will Not Be Profitable by April

Engage Inc., Andover, MA, yesterday abandoned its plan to attain profitability by April.

In a conference call with analysts and the media, the company said it now feels it is impossible to break even — much less attain profitability — by then.

“We will suspend breakeven in the fourth quarter of fiscal 2001,” said Tony Nuzzo, Engage's president/CEO. “We are building a viable long-term business at Engage.”

Nuzzo would not say when he expects the company to attain profitability. In fact, the company even suspended providing guidance to analysts — or an estimate of its financial situation — past its fiscal second quarter, which ends Jan. 31.

For the quarter, Engage said it expects to post revenue of $25 million. It also said it would lose no more than $55 million, or a loss of 28 cents per share.

The company said Jan. 4 that it would eliminate nearly 50 percent of its work force, or about 550 positions. Those cuts, which are expected to be completed by April, will be achieved through attrition, job elimination and layoffs.

Engage did not specify how many jobs would be eliminated outright and how many would be reduced through attrition.

As a result of this restructuring, the company said it expects to incur charges that would reduce its cash on hand by between $17 million and $20 million. The company said it had nearly $86 million in cash on hand Dec. 31, which it said is enough money to fund the business until it reaches profitability.

A recent attempt by Engage to quietly readjust the commission rates it pays its publisher affiliates outraged some of the small Web site owners affected by the new policy.

In the conference call, Nuzzo said the company would readjust its commission structure to a 50/50 split with publishers.

However, in a Jan. 2 letter from Barbara Kelly, Engage's senior vice president of media services, the company told publishers it needed to realign its commission policy and would reduce publishers' commissions to less than the amount Nuzzo stated.

“This notice is to inform you that the commission on the ad sales for your site will be changing — you will receive 40 percent effective Feb. 1, 2001,” Kelly wrote.

While the company does not release its commission rates, publishers said they used to receive 60 percent or more of the dollars generated from ads served to their Web sites.

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