Futurestep.com Reorganizes, Cuts 60 Jobs

Futurestep.com, the online arm of executive recruiting firm Korn/Ferry International, said Monday it is cutting 60 jobs, or 12% of its work force.

In a short statement, Don Spetner, Futurestep senior vice president for global marketing and communications, called the move a response to the slowing job market and an effort to “reorganize operations.” The venture has yet to turn a profit and is seen by many as a drag on its parent company’s profitability.

Spetner’s statement did not elaborate on whether the staff reductions would come in the form of layoffs, a hiring freeze or attrition. Neither he nor other company officials would comment further on the job cuts. Futurestep employs about 500 people worldwide.

Futurestep is the latest among dot-com companies that have had to shed staff as investors become increasingly sour on Internet-based businesses.

For more than 30 years, Los Angeles-based Korn/Ferry has recruited top-level executives for a multitude of corporate clients around the world. But in recent years the company has invested heavily in online recruiting.

That strategy has marred its image among investors. Futurestep, which recruits middle managers via the Internet, has been operating in the red since its inception in May 1998 and has been blamed for hurting Korn/Ferry’s stock price.

“It has so far been a negative because the Korn/Ferry core business is doing fine,” said analyst Arnold Ursaner, managing director for CJS Securities in White Plains, N.Y. “If [Futurestep] can cut costs quickly and downsize it may move them more quickly toward profitability.”

Korn/Ferry has seen a profit every quarter since it went public in March 1999. But its share price has tended to track closer to its record low of $11.51 than its record high of $39.25. On Monday, shares fell 31 cents on the New York Stock Exchange to close at $17.74.

Announcement of the staff reductions comes as the clock ticks down on Korn/Ferry’s stated timetable of turning a profit with Futurestep by the end of its fiscal year on April 30.

“These staff reductions, if true, would be consistent with management taking action to achieve its commitment to Wall Street for the Futurestep business to break even by the end of fiscal year 2001,” said Adam Waldo, an analyst with Credit Suisse First Boston in Chicago.

However, in a 21-page Credit Suisse report issued Monday, Waldo predicted that Korn/Ferry’s online venture wouldn’t see a profit until fall 2003 given the current economic climate. Previously, the securities firm had forecast that Futurestep would turn a profit by the end of October. Moreover, continued losses at Futurestep are expected to drag down Korn/Ferry’s earnings per share for the current fiscal year to 80 cents from a previously forecast $1, the report concluded.

Ursaner, meanwhile, thinks the job cuts at Futurestep indicate the venture is rethinking its growth strategy and signal a new direction under Chief Executive Stephen SemprevivoCQ, who took control of the enterprise toward the end of last year.

Last year Korn/Ferry CEO Windle Priem told Wall Street analysts Futurestep.com would spend heavily on marketing and advertising to establish itself and build its database.

For his part, Ursaner hopes Semprevivo will concentrate less on expanding the database and focus more on maintaining quality candidates. He would also like to see Futurestep.com more closely integrated with its parent company. Referring to the job cuts, Ursaner said, “It’s probably what they should have done all along.”