DrKoop Tries a Harsh Remedy - Layoffs

Layoffs could be the remedy for the ailing Drkoop.com Inc.'s financial health problems.

In a statement, the online health care network announced that it would lay off one-third of its workforce in a move to streamline operations, refocus the company and cut costs.

The Austin, Texas-based company also announced new management appointments and the completion of a $27.5 million equity financing deal with Prime Ventures LLC, J. F. Shea Co., Cramer Rosenthal McGlynn LLC and other investors and new management appointments.

"We said from the beginning that we were going to run this company like a real business," said Ed Cespedes, the company's new president.

"There are real people behind these layoffs, and these were not easy decisions. However, we are ready to put the past behind us and move forward with our plans to rebuild this company and maximize shareholder value," he said.

While it might seem like Drkoop is trying to be more profitable by cutting overhead costs, Catherine Monaghan, a health care analyst at Lincoln, Mass.,-based Gomez Advisors Inc. said she thinks the company is looking for buyers.

"With the new management, the new infusion of cash, they're making it more attractive for buyers," she said.

"I suppose it would help because its cutting overhead, but the revenue model is really the problem. It's been shown that purely content sites don't create enough revenues."

The company also said it had renegotiated some of its portal agreements and reduced its advertising expenses to cut costs.

Last month, two little-known companies, Reston, Va-based MillenniumHealth Communications Inc. and Undertherapy.com in Beverly Hills, Calif., announced their intentions to negotiate takeovers. But Drkoop.com rejected Undertherapy's deal and announced an end to negotiations with MillenniumHealth soon after.

Monaghan said she thinks Drkoop wasn't serious about their takeover offers but now is readying itself for serious buyers.

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More about Cramer Rosenthal McGlynnDrkoop.comGomez AdvisorsMillenniumHealth CommunicationsPrime Ventures

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