Loudcloud to cut 122 jobs

E-commerce hosting company Loudcloud Inc. is planning to lay off 122 workers, or 19 percent of its workforce in an effort to break even.

The move comes two months after the company's initial public offering failed to meet expectations. Sunnyvale, Calif.-based Loudcloud was founded in September 1999 by Netscape Communications Corp. co-founder Marc Andreessen.

In a statement, Loudcloud said the layoffs are part of a reorganization plan intended to help the company reach the break-even point. The layoffs leave the company with 507 employees.

"We are pleased that the initiatives we are announcing today are designed to allow us to reach cash flow break-even with our existing financial resources, while maximizing both the quality and reliability of Loudcloud's customer service," Rod Sherwood, executive vice president and chief financial officer, said in the statement.

Loudcloud also said it will focus on customer sales, support and satisfaction, as well as the the company's core research and development efforts, while scaling back internal support functions. The company said additional savings are expected through the "reduction of a variety of headcount-related and discretionary expense items.

The company also announced changes to its senior management team, including the appointment of two new senior executives.

Loudcloud named former Blockbuster Inc. executive Shellye Archambeau as its chief marketing officer and former At Home Corp. executive John O'Farrell as its executive vice-president of business development. Meanwhile, Mike Green, Loudcloud's president of field operations, is "returning to retirement," the company said.

"The initiatives that we are announcing today are part of our ongoing efforts so that we prudently manage our cash expenditures," said Ben Horowitz, Loudcloud's president and CEO, in the statement. "We are beginning to recognize the leverage in our business model, which is designed to replace human capital with technological automation. Therefore, we are confident that we can maintain our superior levels of quality and customer service with our planned staffing levels."

William Martorelli, an analyst at Hurwitz Group Inc. in Framingham, Mass., said the layoffs announced by Loudcloud are a "prudent response to difficult times."

"It means things are slow in the industry," he said.

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