Perhaps most intriguing about TheStreet.com's announcement to shut down its U.K. office was the indication it would use some of its cash and stock for acquisitions, or what the company's CEO called "consolidation opportunities." It's all part of TheStreet.com's new business plan for 2001, only the first part of which was revealed Thursday.
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The choices may be clear, but circumstances can dictate the correct decision is a combination of the two. That's what the financial information and commentary site has apparently decided to do with the cost-cutting portion of its 2001 business plan to make the company cash flow positive by the second half of next year. "The other half of the equation: our vision for growing revenues in 2001 and beyond," as Clarke put it, will be presented before the end of the current quarter.
"With our strong balance sheet, cash position and public currency, we are confident in our ability to be a consolidator -- and winner -- in our space," Clarke said. As part of the winning formula, TheStreet.com will cut payroll by 20%, or about 40 full-timers, on a company-wide basis to minimize the impact on specific departments.
Other more immediately visible cost-cutting measures include pulling the plug on TheStreet.com's U.K. operations and ending its partnership with the New York Times Company (NYSE: NYT) by the end of the month.
U.K. couldn't grow fast enough
TheStreet.com owns 63% of TheStreet.co.uk, launched in February of this year. The U.S. parent will buy the 2.5 million shares held by U.K. investors and terminate their investment agreement for $3 million in cash and 1.25 million shares of TheStreet.com's common stock. It will take a one-time charge of between $6 million and $8.5 million for discontinuing its U.K. operations, which accounted for about $9 million, or nearly one-quarter, of TheStreet.com's net losses through September of this year.
TheStreet.co.uk was "was going to run out of money" by year's end. Neither TheStreet.com nor any of its U.K. investors were willing to pour any more dollars or pounds into the operation, whose projected future losses were estimated at $16 million. The U.K. site was growing, but "it couldn't grow fast enough," Clarke said. "At this point in our lifecycle we chose not to carry any company or division that slows our march to profitability."
Joint newsroom de-coupled
The cost-cutting measures announced Thursday will also bring to an end the joint newsroom operated by TheStreet.com and The New Your Times since mid-1999. The partnership grew out of the New York Times Company's January 1999 investment of $15 million in TheStreet.com, which gave the 19th century, dead-tree "paper of record" a 5.7% interest in the pixels-only publication.
"We learned a lot from each other during these past 18 months,'' said David Kansas, editor-in-chief at TheStreet.com. "The joint newsroom produced good journalism. We're now both comfortable with our abilities to move forward independently.'' The shared operations will end by the end of this month.
Business overhaul
Earlier this year, TheStreet.com overhauled its business, changing its main flagship website from a subscription-based service to a freebie. The company launched at the same time a new premium subscription service called RealMoney.com, whose content is available on the free site after first appearing on the subscription site.
With that new model, TheStreet.com plugged an advertising component into its business model just as investors stopped giving the benefit of the doubt to ad-based online businesses and the carpet was pulled out from under such companies and their stocks. Shares of TheStreet.com -- which hit their all-time high of around $70 the day the company went public -- are down over 85% year to date.
Perhaps most intriguing about Thursday's announcement was the indication that some of the $90 million cash position and "public currency" -- in other words, stock -- that the company had at the end of the third quarter would be used for acquisitions, or what CEO Clarke called "consolidation opportunities."
That's part of the revenue-generating side of TheStreet.com's new business plan, which Clarke said the company will unveil later this quarter. In other words, stay tuned.
Your Turn:
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