Market Takes a Hefty Toll

A top Web portal, a DSL equipment maker, and popular domain name registrar make leadership changes at the top. Yahoo! chairman steps down, Copper Mountain CEO steps up, BulkRegister chief is escorted to the door.

by internetnews.com Staff [March 8, 2001]

After keeping investors on the edge of their seats for much of the day, Yahoo! announced that Tim Koogle is stepping down as company chief executive officer. Koogle will stay on as chairman of Yahoo's Board of Directors and will continue as interim chief until a replacement is found.

"Our belief in the Internet remains high," says Koogle. "This is our passion and it is certainly mine."

The company also says first quarter earnings for 2001 probably won't meet expectations when they release the official numbers on April 11. Yahoo says first quarter 2001 revenues are now expected to be in the range of $170 million to $180 million. Analysts originally estimated Yahoo's revenue to be about $227.5 million.

Santa Clara-based Yahoo blamed the expected shortfall on the weakening economy, advertising and overall market uncertainty.

Earlier Wednesday, shares of Yahoo! came to a grinding halt at 9:37 Eastern time. NASDAQ officials pulled the plug on the company's trading after the company said it was going to make a major announcement during trading. Until Yahoo made the announcement their stock was frozen at $20.96

Despite the bad news, company executives remain optimistic. Yahoo CFO Susan Decker, Yahoo! chief financial officer, said even though Yahoo is currently being affected by both the weak economy and a client base that is transitioning to traditional marketers, the company remains confident that its business model will continue to be effective.

"Our balance sheet is extremely strong, providing us with another solid foundation from which to weather the current environment," Decker said. "We are evaluating our operating plans and investment priorities to determine which operational changes to pursue that will lead to long-term shareholder value."

The Yahoo! Board of Directors also authorized a stock repurchase program this week. The company may buy back up to $500 million of its outstanding common stock in the open market from time to time over the next two years, depending on market conditions, share price and other factors. As of March, Yahoo! had approximately 565 million shares of common stock outstanding.

Uphill climb
Copper Mountain Networks Inc.'s chairman resigned Wednesday as officials announced an upper management shakeup and a 25 percent staff reduction.

Chairman and Public Network Business Unit General Manager Joseph Markee resigned to pursue other opportunities. Rick Gilbert, president and chief executive officer, will take the helm as chairman.

Officials details concerning the layoffs were sketchy. About 112 employees were informed this morning and told to pack up their things.

Copper Mountain also announced it would restructure charges of $5-7 million to cover severance packages, outplacement and asset write-offs, to be charged in the first quarter of 2001.

Steven Hunt, vice president of engineering, will take over as general manager of the public network business unit. It falls on Hunt's shoulders to drum up more DSL equipment sales in the business sector.

John Creelman, chief financial officer, also left to pursue other opportunities, a move that puts Michael Staiger, vice president of business development, in charge of Copper Moutain's financial operations.

The DSL equipment maker has been the unfortunate victim of an industry-wide breakdown in high-speed Internet deployment, a trend that started with the dissolution of broadband Internet service providers and ended with the scale back in deployment by many data exchange carriers.

The uncertain DSL market makes it hard to determine when the company will be able to post a profit in 2001, and officials have already announced lower revenue forecasts for 2001.

Markee and Creelman are expected to leave by the end of March.

Bulk displacement
In a surprise move late Tuesday, BulkRegister.com, the fourth largest domain registrar with 6.7 percent of the market as of December 2000, fired Chief Executive Officer Tony Keyes and 23 of its 33 employees.

Paul Judge, a co-founder and member of the board of BulkRegister, said most of the positions were in executive management as well as sales and marketing. Technical and customer support staff were not affected, he said.

"We had grown a little top-heavy. We believe that the domain registration market is not growing as fast as it was when we launched. Getting this company to profitability calls for a different course of action," said Judge, who added that BulkRegister customers will not see reduction in service as a result of the restructuring.

Tom Cunningham, chief executive officer of Bulkregister's sister company, web hosting and technology firm Alabanza Inc., has taken over as acting chief of the domain name registrar. A search is on for a permanent executive leader.

According to one of the laid off employees, the fired workers were given no notice or severance pay and their medical insurance expires at the end of the month. They are in the process of seeking legal redress, the employee said.

Judge countered that laid-off employees were offered a small severance package, but that it was limited by the firm's financial situation.

"The executive management should have seen this coming. They had all the same numbers the board had. When a company has a ferocious burn, there's just not a lot to go around," he said.

Aside from industry-wide uncertainty, BulkRegister is suffering from a self-inflicted black eye it received last month after an error during a routine upgrade exposed the information of about 200 of its clients. Credit card information and account passwords were not leaked, but a bug in the system's query function caused customers doing look-ups on their accounts to see other customers' domain records, including account names, e-mail addresses and DNS information.

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