Engage raises commission rates

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CMGI-owned Engage sent letters to clients, saying that effective Feb. 1, it was raising its commission rate to 60 percent for some of its sites. The Andover, Mass., marketing company said it needs to raise rates to maintain its product offerings. The price increase came just as Engage announced it would slash half of its staff, or 550 employees, as part of a plan to accelerate profitability, which the Internet ad-management company now says will be possible by the fourth quarter of 2001. Engage said the job cuts would take place over the next several months through a combination of layoffs, position-title eliminations and attrition.

Engage will take a cash charge of about $17 million to $20 million as part of the restructuring and an additional charge of between $23 million and $25 million in non-cash charges. Once implemented, the company expects the job cuts and restructuring to generate better operating margins and cost reductions of around $120 million to $150 million. As part of its restructuring, Engage will increase its focus on software, consolidate offices and renegotiate agreements with some of its network Web sites to increase the percentage of revenue it retains.

The changes should bring Engage to breakeven on a cash earnings basis by the end of the fourth fiscal quarter in 2001. As of the end of November, the company held $100 million in cash and cash equivalents, which the company said will carry it until it's profitable.

Copyright January 2001, Crain Communications Inc.

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