Tantau integration leads to layoffs at 724 Solutions

724 Solutions Inc. on Tuesday announced workforce reductions of 12 per cent, attributing the layoffs to a faster-than-expected integration of Austin-Texas based Tantau Software Inc.

Toronto-based 724 Solutions in January competed the acquisition of Tantau, a provider of software platforms for mobile transactions. But 724 Solutions had not expected to see synergies until well into the third or even fourth quarter.

The company said the integration is a month ahead of schedule, with 724 Solutions having consolidated offices and unified the company network and infrastructure. 724 Solutions, a provider of Internet infrastructure software for mobile financial services, said it will realize an estimated cost savings of between $2 million to $2.5 million in the second quarter.

Those savings will come from eliminating the payroll and benefit costs of 90 employees, or 12 per cent of the company’s workforce, said Karen Basian, 724’s chief financial officer.

“This is one month’s savings of the operating costs associated with both the people and overhead we eliminated today,” said Basian, referring also to savings the company will realize through reduced travel and communications costs. She said the company will take a one-time charge of $5 million to $6 million, relating to severance and restructuring costs.

Basian said reductions were for most the part company-wide, though the North American divisions of the two former companies will suffer the most as 724 Solutions is currently focused on the European and Asian markets.

Chief executive officer John Sims said 724 took care to ensure its two priorities of sales and core development would be left unscathed. Reductions, he said, were made in development-support organizations, among other areas.

Basian said the workforce reduction would not come through attrition or voluntary departure.

“We’ve actually seen our lowest turnover rates, both on a voluntary and involuntary basis in the past five months, from the time of the acquisition,” she said. “One of the reasons we decided to take the action we did today was to make sure we have the right people in the right jobs going forward.”

Sims said the announced layoffs do not signal a shift in 724 Solutions’ commitment to having highly qualified employees.

“Today’s action is a business necessity, but it doesn’t invalidate our focus on attracting and retaining people,” Sims said.

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Jim Love, Chief Content Officer, IT World Canada

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