Out of Cash, FutureLink Plans to Shut Down
FutureLink Corp., which helps businesses run their Internet sites, said it has fired most of its 580 employees and plans to shut down after running out of cash.
The Lake Forest company also said late Tuesday that it had filed for bankruptcy protection, the result of a cash crunch from lower-than-expected sales and an inability to tap the capital market for additional funding. A skeleton staff remains to wind down operations.
The company, which had expanded throughout the nation in recent years through a series of acquisitions, listed $126.3 million in assets and $16.9 million in debts in papers filed in U.S. Bankruptcy Court in New York. Five of the company’s units were included in the Chapter 11 filing, but the Canadian and United Kingdom operations were excluded, FutureLink said in a statement.
FutureLink executives refused to comment.
Nasdaq said Wednesday that it had halted trading in the stock. The shares, which traded as high as $45.50 last September, closed at 38 cents Monday.
FutureLink entered the Internet services market in March 1999. At the time, many experts believed that businesses would turn to FutureLink and others to operate and maintain their software systems for them off-site, including accounting and other functions.
But FutureLink and competitors struggled as demand for such services failed to materialize. FutureLink lost nearly $287 million last year on sales of $126 million.
The company’s financial troubles began to mount in the spring of 2000 when it raised only about $40 million from selling additional stock, former President Glen Holmes said. FutureLink had hoped to generate $150 million to fund operations and help cover the cost of seven acquisitions, he said.
With cash tight, the company received a $10 million infusion from Microsoft Corp., partly to build a research and development laboratory in Orange County. Even though it later obtained additional financing, FutureLink embarked on the first of several rounds of layoffs in October 2000. The company also moved its headquarters from Irvine to Lake Forest, partly to save money, Holmes said.
