Asia Online cuts 56 jobs amid company reorganization

Asia Online cuts jobs, units to help move towards profits.

Asia Online, an internet services company, said it cut 56 jobs, or 6% of its workforce, as part of a reorganization aimed at speeding the company towards profitability.

The cuts come just weeks after the departure last month of chief executive Kevin Randolph. Randolph, who people familiar with the situation say left unwillingly, was replaced by Edward Roberto, former executive vice president of business development.

The job cuts are the first in a planned series of cuts that could shave more than 20% of the 914-strong workforce over the next few weeks. Roberto says the first round of cuts have mainly hit the Hong Kong corporate headquarters but that the company hasn't yet completed a review that could affect more than 100 employees across the region.

"We've got a full blown review of all our operating units going on and until that is completed we won't know the full figure," Roberto says.

As part of the reorganization, the company plans to cut its capital expenditure by an undisclosed amount and discontinue its application services business. Instead it will focus on its internet access, web hosting and professional services businesses.

"We're focusing on businesses that have high margin capacity," Roberto says. "The ASP business in general has not taken off successfully anywhere in the world." He says it would also discontinue its Cenosuite business aimed at renting applications and software to small businesses.

Roberto denies reports from fired staffers that the reorganization was the culmination of a simmering battle for control between former CEO Randolph and Roberto, with whom he co-founded the company.

"Kevin and I founded this business with exactly the same idea and same concept in mind," he says. "There's no difference of opinion of where Kevin and I see the business going, but whenever you have co-founders someone has got to run the company. Kevin rightly took the top spot and became the lightening rod for the press. But the board invested in a vision and a strategy that had two people in it, not one."

The company has never revealed the reason Randolph left. "That's a matter between Kevin and the board," Roberto says.

IPO plans thwarted

Asia Online has acquired 20 internet service companies over the past year and a half. Randolph's vision, articulated in previous interviews, was to grow as fast as possible or risk ceding market opportunity to a competitor. The company, which has some $50 million in the bank, had planned to augment that with an IPO on Nasdaq. Those plans were recently pulled amid a softening of the market toward tech stocks.

Roberto now says the company will put the breaks on. It aims to cut costs by shedding staff, business units and some operations. Even so, he says, "We're not planning to save our way to success." The company says it can't put a dollar figure on the amount it expects to save.

While Roberto insists there is no difference in his goal for the company and Randolph's, the job and unit cuts inevitably will focus the company differently. Randolph's aim had been to build the company on four main pillars: internet access, application services, network integration and web hosting. In the first six months ended June 30, 2000, he had successfully reduced the company's dependence on internet access from nearly 100% to 51%. Web integration and development accounted for 44% of revenue and 5% came from web hosting.

Roberto says the company now plans to focus on the "high end" web hosting business, following a strategy pursued by Hong Kong rival iAsiaWorks, which in turn is following the strategy of US-based Exodus. Since its inception in December 1998 private investors have invested $143 million into Asia Online. Softbank of Japan is its biggest investor, holding nearly 30% of the company.