Ex-hacker to take axe to Letsbuyit offices

The reformed hacker and driving force behind Letsbuyit.com's German venture capitalist saviour Kimvestor, has warned that four of the firm's 14 European offices will close to slash monthly losses estimated at 8m euros.

Twenty-seven-year-old millionaire ex-hacker Kim Schmitz, who was once jailed after a hack that left then German chancellor Helmet Kohl with a credit rating of zero, and his German investment group Kimvestor helped save the troubled co-operative purchasing website from bankruptcy on Thursday.

Kimvestor, which along with existing investors guaranteed Letsbuyit's administrator's costs of 4m euros, has promised 50m euros more for the website by the end of February.

Should the investment proceed as planned, Schmitz has said that the revamped Letsbuyit would slash marketing costs and close four, as yet unnamed, offices. The website is estimated to have spent twice its sales of 38.5m euros on marketing last year.

Schmitz also said that the firm would concentrate on its UK, French and German offices.

However, what kind of shape these offices will be in once the dust settles is unclear. vnunet.com understands that some 30 per cent of the firm's London-based staff have quit, or are planning to do so at the end of the month. It has also now been more than a week since London office staff took customer phone enquiries.

Indeed, despite Schmitz's plans, according to Letsbuyit's acting chief executive, John Palmer, he is still talking to other investors and no deal between the two has been signed, although Palmer told Reuters that he was "favourably disposed to Mr Schmitz".

Palmer has said he needs 40m euros to take the company through to profitability. He will do this by cutting the company's burn rate - the amount it loses each month - from 8m euros to 2.5m euros initially, and then 1m euros a month before reaching break even point by the end of 2002. Some 182m euros has been invested in Letsbuyit.com.

Palmer also said the company would reduce its dependency on physical goods, which incur high storage and delivery costs, by selling low cost, high margin products such as financial services, utility supplies, travel and ticketing.

To date, Letsbuyit.com's business model has seen the firm try to sell very high volumes of goods with low margins, such as consumer goods. Analysts have said the firm makes a loss on practically every sale and that Kimvestor's investment does not change this fundamental problem. They also believe that even Kimvestor's proposed 50m euros may not have bought the company's management enough time to turn its fortunes around.

Palmer, however, is confident the worst is over. "We've had a bit of a hiccup financially, but we have a big vision," he told Reuters.