BOSTON (06/05/2000) - InsWeb Corp., which runs a Web site that lets consumers shop for insurance online, yesterday announced plans to cut its workforce by 40 percent during the next six months and also said that further restructuring moves are in the works, including a relocation of company headquarters from Redwood City, California, to the Sacramento, California, area.
In addition, InsWeb warned that quarterly revenue for the rest of this year will likely be "significantly lower than originally projected" because of the short-term impact of the planned restructuring. Also as a result of the restructuring, Chief Operating Officer Michael Guthrie gained the additional title of president and said he'll work closely with CEO Hussein Enan on new initiatives.
InsWeb has already seen its stock price drop steadily from more than US$30 in December to just above $2 in the last few days. The latest blow was a mid-April announcement by State Farm Mutual Automobile Insurance Co. that it would stop selling products through the company's Web site, resulting in a loss of about 30 percent of InsWeb's revenue.
The upcoming staff cuts weren't a surprise, said Michael Hodes, an analyst at New York-based Goldman Sachs Group Inc.
"They had to respond," he said, adding that InsWeb remains a company with good management and good cash reserves. "It was early with its visions and made a number of innovations (but) was dealt a serious blow when State Farm decided to pull out of its marketplace," Hodes said.
The layoffs - which will affect a total of about 120 people - will result from the discontinuation of initiatives not core to the company's business model and from the consolidation of the company's main operations, which will be moved to the Sacramento area later this year, InsWeb said.
The restructuring moves, combined with other cost-reduction efforts and the $75-million-plus in cash and short-term investments that InsWeb had as of March 31, "make us confident that we will have more than enough cash to allow us to operate comfortably through 2002, at which point we expect to begin generating profits," Enan said in a statement.