ZipRealty Inc. is hoping to use its high-tech edge, personal touch and experience to help the Emeryville-based company fend off the ailments that have infected the diseased housing market and the company. As part of this effort, the residential realty brokerage disclosed plans Tuesday to close brokerages it owned and operated in 11 markets outside the Bay Area. ZipRealty also is cutting about 84 jobs as part of the wide-ranging restructuring and refocusing of the public company. Since the announcement was made, the company's stock has risen 7.9 percent.
The company wants to focus on its most attractive real estate markets. The offices that ZipRealty is closing produced about 13 percent of the company's revenue in 2010. Collectively, the offices have become a drag on the company's finances. "Places that are losing money, ZipRealty decided to shut them down," said James Wilson, an analyst with JMP Securities, an investment firm. The offices that are being shut include Fresno; Charlotte, N.C.; the Florida cities of Naples, Jacksonville, Miami, Palm Beach and Tampa; Hartford, Conn.; Minneapolis; Virginia Beach/Norfolk, Va.; and Tucson, Ariz.
"The pressures on the real estate market continue to be severe," said Lanny Baker, ZipRealty's chief executive officer. "We are purposefully adjusting our cost structure and operating strategy to concentrate resources on the company's most attractive opportunities." In addition, "They need to get to profitability," Wilson said. "It's been a long time since they've been profitable."ZipRealty must face the pressure of a balance sheet that's been stained with red ink for years. The company last turned a profit in the July-September quarter of 2006. Its last annual profit was in 2005. For the most recent 12 months that ended in September, it lost $13.7 million on sales of $125.6 million.
The company thinks that various initiatives started last year will help it burnish its balance sheet. "The steps we have taken are designed to help us achieve positive cash flow for 2011," said John Oldham, a spokesman for ZipRealty. Besides closing offices, the efforts include a transition to a traditional compensation structure for agents. Agents are being paid when they produce a transaction. Previously, ZipRealty paid its agents a salary and a bonus, Wilson said. "We want to focus on our key strengths in technology," Oldham said. "And we really have to focus on the markets where we think we can accomplish our goals." ZipRealty wants to emphasize personalized service, outstanding technology and experienced local agents, Oldham said.
The company thinks it has successfully parlayed its tech edge to keep itself marching forward in tough times. "In 2000, nobody would have even thought of going to the Internet to buy or sell a home," Oldham said. "We were one of the first companies to put listings online. We have changed and adapted, and we will continue to change and adapt." Measured by transactions, ZipRealty is the nation's fifth-largest residential brokerage, according to Oldham. Its goal is to become one of the premier brands that consumers consider, along with Century 21, Coldwell Banker, Prudential and Re/Max. "ZipRealty has a great opportunity," Wilson, the analyst, said. "They are taking the appropriate steps. They are doing the right thing. The consumer wants lots of data on housing and the ability to narrow down what they're looking for. Zip does the best job of providing that." Still, the company has a long way to travel to improve its stock price. The company's shares have rallied this week.
However, the closing price Wednesday of $2.86 was 47 percent below what the 52-week high reached in mid-March. It also was 18 percent above the 52-week low of $2.42. Still, ZipRealty will have to zigzag through considerable headwinds as it attempts to steer to profitability. "The biggest challenge is the overall real estate market," Wilson said. "And they have to figure out how to develop a brand that consumers will recognize, not only to find data, but also to list their house."
The company wants to focus on its most attractive real estate markets. The offices that ZipRealty is closing produced about 13 percent of the company's revenue in 2010. Collectively, the offices have become a drag on the company's finances. "Places that are losing money, ZipRealty decided to shut them down," said James Wilson, an analyst with JMP Securities, an investment firm. The offices that are being shut include Fresno; Charlotte, N.C.; the Florida cities of Naples, Jacksonville, Miami, Palm Beach and Tampa; Hartford, Conn.; Minneapolis; Virginia Beach/Norfolk, Va.; and Tucson, Ariz.
"The pressures on the real estate market continue to be severe," said Lanny Baker, ZipRealty's chief executive officer. "We are purposefully adjusting our cost structure and operating strategy to concentrate resources on the company's most attractive opportunities." In addition, "They need to get to profitability," Wilson said. "It's been a long time since they've been profitable."ZipRealty must face the pressure of a balance sheet that's been stained with red ink for years. The company last turned a profit in the July-September quarter of 2006. Its last annual profit was in 2005. For the most recent 12 months that ended in September, it lost $13.7 million on sales of $125.6 million.
The company thinks that various initiatives started last year will help it burnish its balance sheet. "The steps we have taken are designed to help us achieve positive cash flow for 2011," said John Oldham, a spokesman for ZipRealty. Besides closing offices, the efforts include a transition to a traditional compensation structure for agents. Agents are being paid when they produce a transaction. Previously, ZipRealty paid its agents a salary and a bonus, Wilson said. "We want to focus on our key strengths in technology," Oldham said. "And we really have to focus on the markets where we think we can accomplish our goals." ZipRealty wants to emphasize personalized service, outstanding technology and experienced local agents, Oldham said.
The company thinks it has successfully parlayed its tech edge to keep itself marching forward in tough times. "In 2000, nobody would have even thought of going to the Internet to buy or sell a home," Oldham said. "We were one of the first companies to put listings online. We have changed and adapted, and we will continue to change and adapt." Measured by transactions, ZipRealty is the nation's fifth-largest residential brokerage, according to Oldham. Its goal is to become one of the premier brands that consumers consider, along with Century 21, Coldwell Banker, Prudential and Re/Max. "ZipRealty has a great opportunity," Wilson, the analyst, said. "They are taking the appropriate steps. They are doing the right thing. The consumer wants lots of data on housing and the ability to narrow down what they're looking for. Zip does the best job of providing that." Still, the company has a long way to travel to improve its stock price. The company's shares have rallied this week.
However, the closing price Wednesday of $2.86 was 47 percent below what the 52-week high reached in mid-March. It also was 18 percent above the 52-week low of $2.42. Still, ZipRealty will have to zigzag through considerable headwinds as it attempts to steer to profitability. "The biggest challenge is the overall real estate market," Wilson said. "And they have to figure out how to develop a brand that consumers will recognize, not only to find data, but also to list their house."
No comments:
Post a Comment