CRM vendor slashes workforce

Looking to reduce its expenses, customer relationship management (CRM) software vendor Pegasystems Inc. Tuesday announced plans to cut its workforce by 13 per cent and warned that fourth-quarter sales will likely come in below expectations.

The Cambridge, Mass.-based maker of rules-based CRM applications for use on the Web and in call centers said revenue in the just-ended fourth quarter will be down about 20 per cent from the US$22.7 million that it reported in the third quarter. Pegasystems attributed the drop off to delays in the sales of “several” software licenses that it had counted on for the fourth quarter.

In an effort to reduce its annual costs by an estimated $5 million, the company said 75 of its 600 or so workers are being let go – a move that will result in a $1 million charge against the fourth-quarter financial results.

Despite the dismal fourth quarter, Rick Jones, Pegasystems’ president and chief operating officer, said the company would still report record revenue growth for last year as a whole. Jones added that the downsizing is unrelated to the fourth-quarter revenue shortfall. “We’ve been in the process of redefining and restructuring,” he said.

As part of that effort, Jones said, Pegasystems is expanding its product suite, aligning with new business partners and trying to more deeply penetrate its installed base of users. “We haven’t done everything we can to satisfy the customer,” he said. “There are many other applications they can use that we haven’t provided them.”

A new version of the company’s rules-based product line is scheduled to be announced in the next few weeks, which Jones said will hopefully give Pegasystems more firepower against competitors such as San Mateo, Calif.-based Siebel Systems Inc. and Brampton, Ont.-based Nortel Network Corp.’s Clarify unit. Pegasystems users include Dulles, Va.-based America Online Inc. and Hoffman Estates, Ill.-based Sears, Roebuck and Co., he said.

Pegasystems has had its share of troubles. According to a quarterly filing made to the U.S. Securities and Exchange Commission in November, the company lost 50 per cent of its sales force in 1999. Late that year, the filing said, it also settled two class-action lawsuits related to a restatement of revenue for 1997 and 1998.