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Dot.com options 2000.2
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June 30, 2000: 6:54 p.m. ET
Layoffs in the digital world fired up in May and June, and there may be more to come
By Staff Writer Alex Frew McMillan
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NEW YORK (CNNfn) - Some dot.com employees are adjusting to a whole new set of "options" this year. Do you want to pack up your desk on your way out the door, or would you like us to mail the stuff to you?
When the venture-capital money was flowing freely and Nasdaq stock prices were flying last year, it was hard to envisage such a pass. But here we are. Dot.comers such as Cynthia and Sean Brodrick felt that sinking feeling take over earlier this year. In June, they lost their jobs.
They are not alone. A study by Chicago-based Challenger Gray & Christmas Inc., which helps displaced employees find jobs, shows 5,398 dot.com job cuts since December. But the pace picked up violently in May and continued into June.
"It's accelerating right now. I don't think we're near the end of it," said CEO John Challenger.
Will the pace pick up?
He points out that most of the job cuts have come in business-to-consumer, or B2C, companies. "That doesn't mean B2C in any way is going to be less viable on the Web," he explained. "B2C came first. I think we'll see the same sorting out of B2B later."
 Forrester Research, which specializes in analyzing the online world, expects that more than half the dot.coms that existed at the beginning of 2000 will be gone by 2001.
"We absolutely expect that to continue," said Evie Black Dykema, senior online-retail analyst at Forrester. She is not as confident it will affect the B2B world as strongly, however. She said that is where the most innovation and opportunity is at the moment.
The 5,000-plus cuts in the Challenger study came from 59 companies, both small and large. Almost a third of the companies, 31 percent, shut their doors permanently -- lock stock and portal.
In January, Amazon.com cut 150 people, or 2 percent of its work force, according to the study, which came out this week. In May, retailer Boo.com laid off 400 when it cut its entire work force. APBnews.com did the same in June, shedding 140 jobs, although it announced it would try and reopen if it could land more financing.
All told, 40 companies laid off 2,635 people in May and June alone, according to Challenger Gray & Christmas. That's a fraction of the dot.com work force, for sure, Challenger admitted. The Internet has provided jobs for millions. But he thinks the layoffs, some of which involve the biggest brand names in the digital world, are "representative of what's going on out there."
Better digital mousetraps for sale, half price
It's not enough to have a good product, apparently. APBnews.com, for instance, won an award this year from the National Press Club for being the best journalism Web site. Posthumously, because the site exhausted its financing.
Rumors of its demise may be greatly exaggerated. Eleven days after breaking the bad news to its work force, it resumed paying some employees. It hired back "less than two dozen" employees, according to spokesman Joe Krakoviak. But it is still scrambling for money.
It has appealed to major media organizations to bail it out, Krakoviak said. He is frustrated by the whole experience. "In April of this year the capital markets totally changed with what they wanted from the companies they were investing in," he said.
For two years, the Web company was told to build, he said. Then they were abruptly told to make money, in the middle of their third round of financing, he said.
Was it bad management?
"You could have reasonably expected a businessman and a management team to say this isn't going to continue onward and upward indefinitely," Krakoviak conceded. "But I don't think you could have reasonably expected the capital markets to shut down."
APBnews.com is still kicking, trying to build its model away from straight news. It is about to introduce APB SaferLives, Krakoviak said, a way for consumers to alarm their houses online.
But sometimes the product doesn't matter, according to Challenger. "It's not about quality. These are businesses. It's about making money," he said. "There's lots of great ideas where people don't turn them into businesses. APB is one of them."
Start-ups are realizing it's not that easy being an upstart, according to Dykema. "It's very hard to bring down, to take on the Goliaths in the industry. In clothing, it's very hard to compete against Bloomingdales," the Forrester analyst said.
The traditional businesses may be staid. But they have assets; they have scale; they have relationships with suppliers, she pointed out. "And funding, which is clearly becoming a major obstacle."
A change in the business model
All this means for uncertainty for dot.comers looking out for their own personal funding. Until the Nasdaq shakeup in April, many considered it an easy-money wired world. But dot.comers can't take those stock option millions for granted any more.
With many dot.com stocks declining, it tends to be the most recent hires that are hurt the most because their options are newest. Their exercise price is therefore nearer or above the current price. If the exercise price is above the current price, they're worthless, unless the stock rebounds before they expire.
Analysts suggest that many dot.coms are going to have to change the way they do business. Being first to market, establishing your brand name and - shocker - making money have become themes, as Web financiers and analysts who follow the dot.com world start pushing them.
Challenger said it's hard to get a handle on the exact number of layoffs because many small companies go out of business without a whimper.
"We'd hear about layoffs, and we couldn't find the company," he said. "We didn't know where they were, or if they even existed. We tried to make it [the survey] as comprehensive as we could."
But employees have started to evaluate companies a little more carefully before jumping ship from an established employer. Options are peachy if the stock is going up, no doubt. But other types of benefits can add up, too. A recent study suggests they amount to almost a third of an employee's overall pay.
The Old World gets crowded
Dykema thinks many people may be wondering about their decision to chase the money. She characterized what went on as a career Gold Rush. And all rushes come to an end.
That may mean it starts to get more difficult to get a job at an old-line company. Last year the talk was they were struggling to retain employees and hire new talent.
They are already seeing a few people come back tail between legs, Dykema suggested.
"All those recent MBAs who went to startups will end back at the consulting firms and the investment banks and the brick and mortar retailers," she said. "It's just not as easy as it looked. And the start-ups are realizing that in spades." 
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