FriendFinder Announces $10M Cost Reduction

Jan 25, 2012 2:15 PM PST

BOCA RATON, Fla. — FriendFinder Networks Inc. today announced the implementation of a $10 million cost-reduction initiative.

The cost-reduction initiative includes the consolidation of the company's offices globally to fewer locations and relocating a number of operations to its facility in Sunnyvale, Calif.

The Boca Raton, Fla.-based company, which owns Penthouse magazine and the FriendFinder network of social media sites, also said there have been "changes to the company's workforce across multiple locations," amounting to about $500,000 attributable to expenditures for separation-related benefits.

FriendFinder CEO Marc Bell, in explaining the move, said that the business environment remains challenging because of "softness" in the European markets and declining profit margins in certain countries where JigoCity, its new social commerce business unit, operates.

"We are addressing issues at the individual business unit level and are in the process of implementing the necessary changes and enhancements we believe support our effort to improve profitability and increase shareholder value," Bell said in a statement. "In Europe, for example, we have increased our product offerings and provided more access to alternative payment mechanisms to our customers.

"At JigoCity, we will focus on our best markets and pace our expansion until the markets improve."

Bell said he is making the moves to more closely align its cost structure with its new business model.

"As part of our previously announced efforts to reorganize our operations into individual business units, we have taken commensurate steps to reduce our operating cost structure," he said. "We are confident these actions will enable our individual business units to operate more efficiently, and therefore, in a more cost-effective manner as we focus on growing our revenues."

Last year, FriendFinder reorganized its business operations by splintering the company into 14 divisions to make each more accountable to the bottom line. The company operates

The move created units such as casual dating, social commerce, alternative lifestyles, gaming and interactive video for the adult entertainment and social networking giant. Each division is responsible for its own financial performance.

But the company's financials have taken a hit, seeing a net loss for the third quarter of $5.4 million in its third quarter.

Its stock price also has dropped substantially. Since its May 2011 initial offering at $10 a share, the price per share is at 79 cents.

Just last week, the company was being warned of being delisted by Nasdaq because its stock price fell below $1.

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