So this is what it has come to. The dotcom Titanic is sinking, and the passengers are jumping madly for the lifeboats. But on their way out, they’re buying up as many deck chairs as they can haul off.
Except in this case, the deck chairs are $749 Herman Miller Aeron Chairs.
It’s been a dark week at Scient Corp., the three-year-old consulting firm that expertly rode the Internet economy’s wild explosion — and then took a dive with the sector’s sudden collapse (Scient’s Near-Death Experience).
Late last month, employees and connected outsiders crowded Scient’s San Francisco headquarters to snatch up hundreds of Aerons that had been made expendable by the company’s first round of layoffs, announced back in December. The fire-sale price: $280 per chair.
Even then, employees understood that the news was about to get worse. On April 10, staffers gathered at the company’s new Market Street offices for a potluck “Last Supper” to mark the announcement many knew was coming the next afternoon. Sangria and mudslides flowed freely. “Everyone was full of laughs and smiles, but the underlying gloom was prevalent,” said one employee. Colleagues typed their contact information into a common laptop, so that everyone could keep track of one another after the boom fell.
Make no mistake: Nearly one year after dotcom stocks imploded, the aftershocks continue to hit harder than ever. Companies such as Scient depended on Web startups for business; but what’s more, they counted on brick-and-mortar clients to be scared enough by those dotcoms to spend big and fast on technology services.
Now the dotcom trade has all but vanished. And the big guys are a lot more cautious about throwing IT bucks around. “Our large enterprise clients continue to delay information-technology spending initiatives — which has resulted in further deterioration in our pipeline,” says Scient chairman and CEO Robert M. Howe. A month ago, many tech executives expected that spending would come back in the second half of this year. These days, few hope for a pickup before the end of this year.
Which is to say, the writing is officially on the wall. It was pretty hard to miss before — but for the nearsighted, it’s now in bold capitals and indelible ink. Around lunchtime on April 11, in a conference call with employees, Howe announced 675 more layoffs, representing about half his workforce. Another 175 cuts could come soon. Scient will move its headquarters to New York; its San Francisco office, like those in Boston and Chicago, will be rationalized into a smaller sales office. Scient’s locations in New Jersey and Los Angeles will be shuttered altogether.
Revenue in Scient’s first quarter, which ended March 31, will come in about 45% lower than the $49 million recently expected. The firm expects an operating loss of $32 million. It was needless to say, but Howe said it anyway: “Our expectations for the future have changed.” Business in the second and third quarter, he noted, could actually decline.
Scient’s tidings were hardly exceptional. Web consultants Organic Inc. and Viant Corp. (which, like Scient, was founded by Eric Greenberg), announced their own rounds of job cuts last month. MarchFIRST Inc., the enormous amalgam of Whittman-Hart Inc. and several acquisitions, is reckoned by many on Wall Street to be near death itself. And more-established rivals are feeling pain too: On April 10, PriceWaterhouseCoopers announced that it is planning to lay off as many as 1,000 of its 12,000 employees.
“Look,” Howe says, “this market has changed dramatically, and it’s sending us a signal. We either change, or we perish. Customers want results.”
Results, of course, are what customers have always wanted. Perhaps the dotcom boom allowed everyone to dismiss that notion momentarily — just as it allowed everyone to excuse the normally stunning absence of long-term profitability. Scient and its e-consultant brethren, then, aren’t falling from grace. They’re merely returning to sanity.
“This was a valiant try by a lot of great people,” said Chris Bruno, a former Scient sales director who now heads North American sales for Scale Eight, a storage-infrastructure company. Bruno, who says that he had a great experience before leaving Scient, was one of the folks in line along Market Street last week, clutching a cashier’s check for $280 and hoping to find his old Aeron chair — “the one with Silly String burn marks under the armrests.”
Bruno ended up with another chair. With a Scale Eight buddy, he wheeled the prized Aeron a mile down the streets of San Francisco to its new home. It seemed a striking metaphor for the sharks circling the dotcom waters this winter — a final, surreal image just before the lights go out.