TidePoint lays off about 65, decides to be software seller

E-service company says change is due to `money drying up'

TidePoint changes tack, decides to sell software

January 18, 2001|By June Arney | June Arney,SUN STAFF

TidePoint Corp., a provider of e-commerce services, said yesterday that it has laid off about 65 people, two-thirds of its work force, and now plans to become a software company.

This week's layoffs follow an earlier round of 24 people dismissed in October. The company, which at one point had planned to grow to 200 employees by late last year, now has a staff of about 24.

"It's a reflection of the changing financial market today," said Santosh Chitakki, senior vice president of marketing for TidePoint. "Money is drying up. What we decided to do is take the technology we've developed, which we were planning to offer as a service, and ... become a purely software company."

The new company can operate at a much lower cost, Chitakki said.

The employees who were laid off received a severance package, a percentage of their stock options, extended health benefits and assistance from TidePoint's human resources department, Chitakki said. The layoffs, throughout the company, affected employees at the Arbutus and Woodlawn offices and at the company's new Locust Point offices.

"Over the last six to eight weeks, we could see it coming," Chitakki said. "Most of the investors today are holding back from making investments. It's not easy to raise the kind of money we need."

In contrast, the October layoffs were part of an effort to concentrate on product development and had nothing to do with funding or the business climate, company officials said.

TidePoint was founded in January 2000 with $2 million in seed money. It obtained an additional $11 million from venture capital funds last year, but was unable to secure the $20 million to $30 million it had sought in a second round of funding. Chitakki declined to say how much the second round brought in.

Under its original business model, TidePoint promised clients secure connections and application integration with its complex web of partners, suppliers and customers. Although the proposed software product would continue to fulfill those needs, the fee structure will be different, Chitakki said.

"Now people will just buy the software and install it in their own infrastructure to help them do business with their partners," he said.

A typical customer would have paid a monthly subscription fee starting at about $100,000. Now, under the new plan, the customer will buy the software under a fee structure yet to be disclosed, Chitakki said.

As many as 20 people may be hired by the end of the year to handle consulting, he said.

Chitakki said company officials expect TidePoint to have a positive cash flow by next year.

TidePoint had planned to occupy all three floors of the Dawn Building in the $67 million Tide Point commercial offices project in Locust Point, but now the company will occupy a single floor, Chitakki said.

"The difference between the reaction of people let go this time and last time is that everyone understands the climate," Chitakki explained. "It's not their fault. It's not our fault. This is completely a reflection of the marketplace today."

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