Online financial news provider TheStreet.com, Inc. (Nasdaq: TSCM) said Thursday it will cut 20 percent of its U.S. jobs, close its UK operation and end its joint venture with The New York Times as part of a plan to achieve positive cash flow by the second half of next year.
“In today’s environment, companies have two clear choices: chart a directpath to profitability or shut down,” said Thomas J. Clarke, chief executiveofficer of TheStreet.com. “We’re in thisfor the long haul. And to go the distance, we must operate at peakefficiency while continually exploring ways to grow top-line revenue.”
The job cuts, which affect about 40 full-time employees across alllocations, are being made company-wide in order to blunt the impact on anyspecific department and “ensure the company’s ability to produce atop-quality editorial product,” TheStreet.com said.
End of ‘Times’ Deal
In addition, the joint venture newsroom run with the New York Times — which owns a 5.7 percent stake inTheStreet.com — will close in two weeks, after 18 months in operation.
Clarke said the move will strengthen the company’s ability “to attain profitability,while enhancing shareholder value.”
With US$90 million in cash as of September 30th, Clarke said, TheStreet.com is in a position to take advantage of “bothoperating strength and consolidation opportunities.”
UK Site Running Dry
According to TheStreet.com, its UK division would have run out of money within the next six weeks. TheStreet.com owns 63 percent of the division, whichhas made up almost $9 million of the company’s net losses for the ninemonths ended September 30th.
TheStreet.com has reached an agreement with the UK investors to purchase the 2,550,000 shares held by them for an aggregate consideration of $3 million in cash and 1.25 million shares of TheStreet.com. The move will mean a charge of between $6 million and $8.5 million for the company.
“In light of the circumstances, and our focus on getting to profitability assoon as possible, it made sense for us to spend some money now to save a lotmore later,” said Clarke.
The UK site was growing, but “couldn’t grow fast enough to meet our profitability timetable,” Clark added.
TheStreet.com on Wall Street
TheStreet.com shares fell following the news, and were down 7/16 to 3 1/16in afternoon trading. The shares have fallen from a 52-week high of 22.
Earlier this year, TheStreet.com dropped its subscription-based model and made its service free on the Web, relying more heavily on advertising.
“Unfortunately, our projections didn’t account for the slower-than-anticipated implementation of our news distribution deals, and the impact of seasonality on advertising sales,” said Clarke at the time.
“These factors hampered our aggressive plans for page view and revenue growth,” he added.