Quokka cuts staff by almost 60 percent

After releasing disappointing earnings last week, digital sports entertainment firm Quokka Sports Inc. said Monday it would undergo a major restructuring, cutting its workforce by almost 60 percent and spinning off its technology division.

The layoffs, which will affect 217 jobs, is the second round for Quokka, which just three months ago laid off 90 workers in an effort to reduce costs.

Quokka, which broadcasts sporting events via the Internet, said it plans to focus its core business on live-event coverage and set up its technology division as a separate business that would service companies looking to broadcast content via the Net or wireless devices.

Under the new structure, Quokka said, its operational loss should be reduced considerably. The company estimates that its cash-burn rate would be cut by over 65 percent, to less than US$2 million per month, beginning next month.

Along with a host of other sports sites, Australian-born, San Francisco-based Quokka has hit tough times as its advertising-dependent business model has become less viable.

In an attempt to garner a wider audience, Quokka has shifted during the past year from covering niche sports like round-the-world sailing races and mountain-climbing expeditions to more mainstream sports like baseball, basketball and football. Last year Quokka cut a deal with NBC to produce the official site for the summer Olympic Games in Sydney. It also is producing the official Olympic site for next year's winter games in Salt Lake City.

Despite its cutting-edge technology and high-profile partnerships, Quokka has had a hard time forging the kind of production deals that could sustain its business. The firm posted weak earnings last quarter and has acknowledged that its own auditors likely will say it is in danger of going out of business altogether in the face of mounting losses.

Last week, Quokka reported losses of $19.3 million for the period from October to December, up from $13.6 million in the year-ago quarter. The widening loss was due in part to increased production costs, as well as sales, marketing and general infrastructure expenses. Revenues for the quarter were $9.1 million, up 36 percent from $6.7 million reported for the fourth quarter in 1999.

Quokka said last week that it expects to post operating losses and suffer negative cash flow for the rest of the year. The company's stock closed at $0.19 Monday, way off its 52-week high of $15.25.

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