Razorfish Posts $137 Million LossRazorfish Posts $137 Million Loss

Reeling from office closures, layoffs, and other restructuring moves, E-services provider Razorfish Inc. yesterday reported that its net loss plunged to $137.1 million on revenue of $28.7 million for the second quarter of 2001, ended June 30. The New York service provider has fallen a long way from last year's second quarter, when it reported a net income of $5.1 million on revenue of $76.6 million.

Excluding a $70 million restructuring charge associated with closures of offices in Helsinki, Finland, and Milan, Italy, and a reduction in headcount by about 600 employees, Razorfish lost $3.7 million for the quarter on $7.3 million in revenue. On the positive side, Razorfish says that, during the quarter, it added several blue-chip clients to its roster, including Glaxo SmithKline, Solaris Health Network, and Canadian Broadcasting.

Robert St. Jean, a senior JP Morgan analyst, says Razorfish's precarious financial situation is common. A number of smaller service providers built their businesses by promising to Web-enable their clients' business processes and help those clients find additional revenue through E-business. But the reality is that many smaller clients are no longer in business, and larger IT services buyers have called into question the quality of the services they received. "Many Internet projects with grand ambitions ran into problems, due to the service providers' inability to do the work on budget and on schedule," St. Jean says.

Razorfish's future is something of a mystery. With the stock trading between 29 cents and 35 cents on any given day, down from its 52-week high of $17.38, there isn't much room for the company to scale down to a level where it can return to profitability. And with competitors like ScientCorp. and iXL Enterprises Inc. already merging or being acquired, Razorfish appears to be left to swim on its own.