Evoke Restructures to Speed Profitability
The new business plan, which the company said is fully funded, focuses on Evoke's core service offerings -- Webconferencing and collaboration -- while eliminating back-end service engines and slashing operating expenses by about $25 million over the next 12 months.
The reduction in operating expenses includes cutting the company's workforce by about 112 people, bringing the total staff to about 208. The company's sales force will comprise about 80 of those 208 positions. Evoke also plans to reduce the costs associated with leasing field offices by leveraging virtual offices in some of its major markets.
"Our mission of becoming a strong, operationally excellent organization with a superior service offering and exceptional customer support was the driving force behind the restructuring," said Paul Berberian, president and chief executive officer. "Although we've had to make some difficult decisions, we believe the company will be better positioned to sustain simple, reliable services for our customers and partners."
The new strategy coincides with the resignation of Chief Financial Officer Terry Kawaja, though the company said he would remain with the company through a transition period.
"We thank Terry for his contributions during this past year and wish him well in his new initiatives," Berberian said. "Terry's merger and acquisition skills were critical when our strategy was more acquisition focused. However, with the current market conditions, the company requires an operationally focused CFO to support our restructuring strategy."
Ken Mesikapp, vice president of finance, will step into Kawaja's shoes as acting CFO.
Evoke said its financials remain strong, with more than $43 million in cash on hand and minimal debt as of Dec. 31 2000. Also, Evoke said it anticipates to report revenue exceeding Wall Street's expectations for fourth quarter 2000.
"We have achieved tremendous growth in our core services, Webconferencing and collaboration, as evidenced by the continued strength of our financial performance in the fourth quarter," Berberian said. "We continue to drive usage of our services by adding customers, further penetrating existing customers and adding new distribution partners. By focusing our efforts on these core competencies, we can most efficiently grow our business."
Evoke's renewed focus on its core services means it will jettison Web Talk, its voice chat service, and Talking Email, its voice-to-email messaging service. The strategy also focuses on strategic outsourcing, as evinced by the company's new strategic alliance with Digital Island, which will now outsource its Webcasting service. The company said it would continue to offer streaming functionality as a feature of its Webconferencing and collaboration services. Under the terms of the alliance, Digital Island will also become a reseller of the company's virtual meeting services.
Evoke is also refocusing its marketing strategy on revenue generating activities such as sales-lead generation through customer-centric marketing. The company said its marketing purchase commitments with Excite@Home and Lycos have been significantly reduced or eliminated.
Related to that move, the company intends to write off about $8.6 million in the fourth quarter of 2000, reflecting costs associated with terminating its agreements with Excite@Home, as well as the reduction of certain lease and related facility expenses and other costs. The company also anticipates write-offs in 1Q01 which will include employee severance packages related to the restructuring.
The company said reductions in its operating expenses due to the plan should lead to EBITDA losses in the range of $14 to $18 million in 2001, significantly lower than the estimate under the company's previous plan. Additionally, the company said the timing of the restructuring means about two-thirds of those losses will take place in the first quarter.
"While we have lowered our 2001 top-line estimates to reflect our restructuring, we anticipate these initiatives will have a very positive impact on EBITDA as reflected by our revised guidance,." Berberian said. "We expect continued strong revenue growth in 2002. This restructuring provides a solid foundation from which we can continue to grow revenues and attain profitability."
