Shares in SmartForce shed a third of their value yesterday following the announcement of a profit warning and a major restructuring at the Irish e-learning firm.
The company, which employs 500 staff in the Republic in research and development functions, said it would have to cut jobs to achieve immediate and substantial cost reductions.
SmartForce, which provides learning solutions to business, also said its proposed $284 million (€322.5 million) merger with Centra Software had been terminated.
Mr Paul Henry, executive vicepresident of SmartForce, said the firm had not yet decided on the numbers of redundancies that would be made.
He added, however, that it was clear that cuts would have to be significant, given that the bulk of the firm's costs were in people.
SmartForce reported that its first-quarter results would be substantially lower than forecast with expected revenues of $42-$43 million, significantly below analysts' expectations of $67 million.
The firm will report a loss of between $0.26 and $0.27 per share.
This is a major drop on its performance in the fourth quarter of 2001 when it reported a negligible loss.
SmartForce's shares fell 35 per cent when the Nasdaq exchange opened yesterday.
In the first 15 minutes of trading, more than 1.5 million shares were traded, almost the average daily volume.
Mr Barry Dixon, technology analyst with Davy Stockbrokers, said the profit warning was a shock and it suggested there had been a significant slowdown in corporate spending on training.
"I think that while consumer spending continues to be robust, corporate spending has not yet recovered," said Mr Dixon.
Mr Henry said the firm simply had not signed enough business in the quarter to reach its targets. "To some extent that is a reflection of the environment.
"There is a lot of bad corporate news out there ... companies are slow to make contractual commitments in the information technology, telecoms, training or e-learning sectors," he said
He added that the firm could give no guidance on future revenues or job cuts until its scheduled results announcement on April 18th.
But the firm said it expected a significant restructuring charge in the second quarter.
SmartForce also said it would take a $2-$2.5 million charge in the first quarter due to the termination of its proposed merger with the US firm Centra Software, which was announced in January.
Although it was a mutual decision to terminate the acquisition, Mr Henry said, the firm was disappointed and still thought the acquisition was a good tactical fit.
But he said the reality was that, with revenues running well short of expectations, the firm did not want to have the problems associated with integrating the businesses.
SmartForce's shares were down almost 33 per cent at $6.84 on the Nasdaq exchange last night as the Irish market closed, far below the firm's 2002 high of more than $25 in January.
