Yellow pages publisher Dex One reported progress Thursday in its effort to transform into a digital advertising company but said more cost-cutting is required to offset declining ad sales in its print directories business.
The Cary-based company plans to reduce costs by $120 million this year, about the same as it cut last year. Although previous cost-cutting efforts resulted in major layoffs in late 2010 and in 2011, CEO Alfred Mockett said he doesn't anticipate layoffs this year.
"Although I can never say never, I believe all the significant head count reductions have been completed," he said. Mockett anticipates any downsizing this year would happen through "voluntary attrition," or not replacing employees who depart on their own.
Payroll-related costs account for about 30 percent of the company's total costs, Mockett said, leaving plenty of room for reductions elsewhere.
Investors initially seemed encouraged that fourth-quarter bookings for digital ads, a leading indicator of future revenue, rose 34 percent compared with the same period a year ago. In the third quarter, digital ad bookings rose 29 percent from the year-ago period.
After being up as many as 45 cents in trading Thursday, Dex shares closed up 5 cents at $1.80. The stock hit a 52-week high of $5.58 last March and sunk as low as 36 cents in October.
The bulk of the cost-cutting will stem from what Mockett calls "smart distribution" of print directories. With seven of 10 adults using print directories, that means three of 10 people never open the books, Mockett said. Dex is putting programs in place to make sure that the directories are delivered only to the people who really want them.
That doesn't mean, how ever, that Dex is giving up on three of 10 consumers.
"We've got apps for iPhones, iPads, all the Droid phones, so they can still use digital for local search instead of using print," Mockett said.
Dex has 300 employees in the Triangle and about 2,700 overall.
Dex is fighting against the economic slowdown, which has especially hurt its bread-and-butter small-business customers, as well as advertisers shifting their dollars away from print.
Revenue in the fourth quarter declined 17 percent to $1.48 billion. In addition, Dex expects ad sales, also a leading indicator of future revenue, to decline 16 percent to 17 percent in the first quarter. With regard to digital sales, Mockett said the company has a much more competitive and complete digital portfolio and is benefiting from partnerships it worked out last year with Bing, Google, Yahoo, Yelp and others.
Its portfolio of digital products for businesses includes website creation and hosting, search-engine marketing and optimization and reputation management - monitoring and responding to comments about a company on social media.
Last year, the company recruited 850 workers to focus on digital advertising even as it was cutting jobs, Mockett said. The net loss of jobs exceeded 500.
About 40 percent of the company's sales force was replaced with more digital-savvy employees who are better able to sell Dex's integrated offerings, Mockett said. In major markets, the company has teams of salespeople that focus only on digital sales. And it is experimenting with teams of digital-only salespeople in Atlanta and Philadelphia - markets where it doesn't have print directories.
Dex publishes more than 800 yellow pages directories in 28 states.
Mockett said industry experts expect ad sales for printed directories to decline at a 20 percent annual rate for the foreseeable future. While Dex expects to do a little bit better than that, "digital sales will not overcome print declines," he said.
In the fourth quarter, digital ads represented 19 percent of total revenue. The company's target for 2012 is that digital bookings will account for 30 percent of all bookings.
"Considerable progress was made in 2011," Mockett said. "We must maintain this momentum in the face of relatively weak local business conditions."