Orem company reduces one-fifth of workforce

Orem eCommerce software seller iMergent, whose sales suffered in part because of national and local government inquiries over its business practices, laid off one-fifth of its total workforce this week, the company disclosed Thursday.

The layoffs are aimed at cutting its operating expenses by between 15 percent and 20 percent, and are expected to deliver savings of about $1 million annually, said Don Danks, iMergent's chief executive, in a statement Thursday.

"The majority of the layoffs have already occurred and they were primarily in sales, general administration and support," said Jeffrey Korn, iMergent's attorney. He declined to specify the number of people laid off or the size of its current workforce.

The state Division of Consumer Protection, which had threatened earlier this year to shut down iMergent if it refused to register as a business opportunity but later dropped its petition, said the company had -- before its restructuring -- claimed it had close to 400 workers at one point.

IMergent, which in recent months settled similar complaints with Louisiana, is still barred from doing business in California and North Carolina. These two states, which account for about 15 percent of the company's total revenues, had issued injunctions for the company to file as a business opportunity seller. They allege the company is selling "business opportunities" and therefore, has to register with the state in order to conduct those sales.

"Our revenues are down, but the layoffs aren't an admission that we are not expecting to eventually do business in California or North Carolina," Korn said.

The company is still fighting the terms of the injunctions in court, saying it sells tools for businesses but not business opportunities.

Meanwhile, the layoffs will result in a charge of less than $50,000 in the second quarter, the company said in Thursday's statement.

Because of the layoffs, lower-than-expected sales and continued absence from the California and North Carolina markets, the company revised downwards its guidance for fiscal 2008's revenues and net dollar volume of contracts, Danks said. These are expected to drop between 15 percent and 20 percent from $151.6 million in revenues in fiscal 2007 and $165.3 million in net dollar volume of contracts in fiscal 2007, respectively.

IMergent had previously expected a 10 percent to 15 percent increase over its fiscal 2007 results.

News of the layoffs and revised 2008 guidance sent shares of iMergent plunging nearly 17 percent, or $2.11, to close Thursday's trading session at $10.59 a share. In afterhours trading Thursday, the company's shares dropped another 2.44 percent, or 26 cents to $10.33.

Earlier this year, iMergent avoided a potential delisting from the American Stock Exchange after the company took "prompt corrective action" to address what the exchange called "inadequate internal controls."

The company had violated AMEX's listing standards after Danks, its former chairman, leaked material information from its third-quarter fiscal earnings before it was due to be released to the public in May. Danks resigned as chairman but remains as chief executive of the company.

The company also recently settled a shareholders' class action lawsuit alleging accounting irregularities and illegal insider trading against its current and former officers and directors. The shareholders claimed they were duped into buying stock by iMergent's misleading statements about its prospects.

iMergent, which settled without admitting liability, received $3.3 million in proceeds from its directors' and officers' insurance policy. About $2.8 million of the funds was used to settle the consolidated class action case.