The restructuring that OpenTV CEO James Ackerman had said would occur shook the interactive-television manufacturer last week with an approximately 47% reduction of its workforce. The 315 positions will be eliminated from all divisions of the company.
The restructuring is expected to be complete by the end of first quarter 2003. The company expects annualized cost savings and a cash-burn reduction of approximately $60.3 million and $40.8 million, respectively, beginning in the second quarter. Pretax restructuring charges are expected to be $29 million, of which $20 million will represent cash obligations. The charge is in addition to $4.1 million in pretax restructuring charges related to the previously announced closing of the company's Naperville, Ill., office and $4 million in restructuring costs for subsidiary Wink.
Seven regional offices around the world also will be closed as part of the cuts. The company expects to move OpenTV's Mountain View, Calif., office and Wink's Alameda, Calif., offices into more centrally located space. Wink will continue to operate as a separate subsidiary.
Adi Kishore, media and entertainment strategies analyst with The Yankee Group, says that he was somewhat surprised by the scale of the layoffs and notes that they underscore how difficult the economic climate is for interactive-television vendors.
"MSOs are under tremendous pressure," he says, "to curtail spending and cut down on debt."