Pegasus Reorganizes, Cut Global Offices, Jobs

DALLAS— Pegasus Solutions announced a reorganization plan that would cut approximately 300 positions, or 15% of its workforce, and eliminate its Providence, RI call center. In an interview with HOTEL BUSINESS®, Chairman/CEO John Davis said the actions the company is taking are designed to improve its overall business model, reduce overhead and improve efficiency within its corporate structure. “The primary difference will be that we’ll now be organized around functional areas rather than business units,” said Davis. “In the past, we built around business units, but as we grew, we ended up with four different business silos that were self functioning. We found we couldn’t create a lot of efficiencies if we kept them separate,” he said. The move will include combining the business units, said Davis, “so instead of four units with 30 employees, some of which are doing the same tasks, we’ll have 20 people organized by function.” In the company’s current business unit structure, several functions, such as sales, account management and information technology, are duplicated within each unit, he said. The reorganization will eliminate many of these resource and task redundancies, said company executives. Under the new functional organization, centralized sales, account management and information technology teams will provide services across all of the company’s business units. Within the company’s technology segment, the sales and account management functions will be organized on a geographical basis and will focus on individual customer relationships that span across all product lines. As such, Pegasus offices in Europe and Asia will be consolidated, said Davis. “We had eight offices and Europe and will now have three. In Asia, where we also had eight offices, we’ll have four,” he said. In addition, Pegasus Solutions will be making staffing and operating changes at its call center operations. According to Davis, the company plans to reduce the number of employees in its call centers and will close its Providence, RI call center, moving all related operations to larger facilities in Phoenix. This move is expected to be complete by the end of 2002, said Davis. Any additional support needed for call center operations will be outsourced, Davis noted. Corporate staffers will also be relocating to new facilities in Dallas next May, said executives. Pegasus expects to take a one-time pre-tax charge associated with the restructuring of approximately $5 million in the third quarter primarily related to workforce reductions and consolidation of facilities. In addition, the company expects to incur other one-time charges of $3 million, which consists primarily of fees paid or to be paid during the third and fourth quarters to independent consultants who assisted with the review, said the company. Susan Cole, CFO for Pegasus said she expects the plan to result in full-year cot savings “in the range of $.21 to $.24 per share beginning in 2002.” Meanwhile, Pegasus is pushing its web-based PMS system. The company inked a deal with Six Continents (Bass) in June to provide property management systems to its hotels worldwide. According to Davis, the company is currently in talks with a number of other major hotel chains interested in the system. Earlier, Pegasus lowered it revenue guidance for the fourth quarter of 2001 by $2 million. The company expects revenues to be between $43 and $45 million for the quarter.