Yellow pages publisher Dex One reported progress in its effort to transform itself into a digital advertising company but said more cost-cutting is required because lagging ad sales for its print directories continue to drag down its overall results.
But, in contrast to the major layoffs that the Cary-based company went through in late 2010 and in 2011, CEO Alfred Mockett said in an interview that he didn't anticipate any layoffs this year despite plans to reduce costs by $120 million -- about the same as last year.
Investors seemed encouraged that fourth-quarter bookings for digital ads, a leading indicator of future revenue, rose 34 percent in the fourth quarter compared to a year ago -- up from a 29 percent increase in the third quarter.
Dex shares were trading at $1.92, up 17 cents -- or 9 percent -- around noon. Dex shares hit a 52-week high of $5.58 last March and sunk as low as 36 cents in October.
Mockett said of the impact of cost cuts on the company's workforce: "Although I can never say never, I believe all the significant head count reductions have been completed,." He anticipates any downsizing in jobs this year would happen through "voluntary attrition" -- that is, not replacing employees who depart on their own.
Payroll-related costs account for about 30 percent of total costs, Mockett said, leaving plenty of room for reductions elsewhere.
The bulk of the cost-cutting will stem from what Mockett called "smart distribution" of print directories.
With 7 of 10 adults using print directories, "that means 3 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, however, that Dex is giving up on 3 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. That's lower than the company's recent trend but is due to seasonal factors, Gregory Freiberg, the company's chief financial officer, told analysts.
With regard to digital sales, Mockett said the company has "a much more competitive and complete digital portfolio" and is benefitting from partnerships it worked out last year with Bing, Google, Yahoo, Yelp and others.
Its portfolio of digital products for businesses include website creation and hosting, search-engine marketing and optimization, reputation management -- monitoring and responding to comments about a company on social media -- and many others.
Last year the company instituted "a significant skills refresh" by recruiting 850 new workers even as it was cutting jobs, Mockett said. The net loss of jobs exceeded 500.
That included replacing 40 percent of the company's sales force "with digital savvy individuals who can sell integrated offerings," Mockett said. The company's "sales academy" also provides online training, podcasts and other e-learning tools to create what Mockett called a "21st century sales force."
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.
"Digital knows no boundaries," Mockett said. Dex published 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."
Dex also said is pursuing amendments to its credit agreements with its largest lenders that would enable it to reduce its debt by about $200 million by buying its bonds on the open market. Dex's net debt -- its debt minus its cash -- totaled $2.25 billion at the end of 2011, down from $2.61 billion a year earlier.