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Motricity To Cut Full-Time Workforce by 16 Percent

Posted December 1, 2006

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— Motricity, one of the region’s best-known and fastest growing technology companies, will lay off more than 16 percent of its full-time employees as part of a move to improve efficiencies, Chief Executive Ryan Wuerch said.

Some 50 employees were given 60 days' notice that their jobs were being eliminated. Each will receive four weeks of severance pay plus an additional week of pay for each year he or she has worked at Motricity, according to the company.

Motricity, an acknowledged world leader in development and delivery of mobile content technology, employs 425 employees, one third of whom are contractors. Of the total, 375 work at the new corporate headquarters in Durham. Motricity just finished consolidating operations from two buildings into a newly renovated section of the American Tobacco Historic District.

Most of the people affected by the layoffs work in Durham, Wuerch said in an interview. Motricity also has offices in Los Angeles and in Europe.

“The primary reason we are doing this is to create a higher degree of focus on the delivery and execution to our customer base of the products and services they expect,” Wuerch said. “This is all about creating a very, very strong operation. This is all about focus, setting the bar for customer satisfaction and delivering on key financial benchmarks that shareholders expect.

“This is painful, but the company will become better because of it."

No senior-level executives will be laid off, and no business groups will be dissolved, he said.

“All the business lines you see today are going forward,” he said. “Each one of the channels continues to grow.”

The layoffs are being made despite the fact Motricity is winning customers and increasing revenues. Reportedly, several deals with major media and telecommunications firms are either close to being announced or will be signed soon. Motricity already works with clients such as Sprint, Verizon Wireless, Cingular, Palm, CBS and Black Entertainment Television.

To accommodate its growth, Motricity added more than 200 employees in the past year. Motricity also acquired Gold Pocket Wireless, a developer of mobile content delivery solutions for media and entertainment companies, in July.

Wuerch stressed the workforce reduction was not simply a matter of cutting the burn rate of investment capital Motricity has raised.

“Right now, we are a very well-funded company, and we don’t have a need or a desire to raise capital today,” he said.

Motricity has raised more than $150 million in venture capital, including $72 million this year. Investors include Technology Crossover Ventures, New Enterprise Associates, Noro-Moseley Partners, Intel Capital, Wakefield Group, Southern Capitol Ventures and Advanced Equities.

“As a company, we continue to experience tremendous growth,” he said. “We had a record-breaking year in every way in 2006, whether it’s in customers or revenues, and 2007 is looking to be a year in which we will enjoy triple-digit growth in revenues and margins and, ultimately, profitability.”

Expansion also led to challenges in terms of organization and whether as many people were needed as original expansion plans anticipated, he added.

“Because we were growing so rapidly, it was important that we make sure any area we put in place was 100 percent optimized and efficient,” Wuerch explained. “It’s inevitable when you grow so rapidly.

“You find out you have many more people than a solution required, or a layer of organization that you felt you needed ended up slowing down what you had done initially to eliminate a problem.”

The company’s latest move comes after Wuerch initiated the restructuring effort two months ago with 15 layoffs. Of those affected, fewer than 10 were full-time employees, according to a company spokesman.

The cutbacks in personnel are part of a corporate plan to reduce layers of operation, to combine some internal organizations and to enable the firm to focus more sharply on execution and customer support, Wuerch said.

“What we are doing today is an extension of what we announced two months ago,” he explained. “We saw that more efficiencies as a company would enable us to execute even better with our customers.

“We are seen as one of the largest and one of the leaders in the mobile content and solutions industry, and because of that we have to be sure every day that we are executing against every single metric we are measured against.”

However, Wuerch, who founded Motricity as PowerByHand in Nashville, Tenn., in 2001, conceded that the layoffs were difficult. Those affected were told individually before Wuerch had a company-wide meeting on Thursday afternoon.

Wuerch has made it company policy that he interview employees before they are hired. He also has regular breakfasts with new employees.

“Companies succeed because of people – great people – and not technology,” he said. “It is particularly hard terminating people because it is the people that make you successful, but ultimately every great company goes through this.”

PowerByHand merged with Durham-based Pinpoint Networks in 2004 and relocated its headquarters to Durham. Later that year, the company’s name was changed to Motricity.
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