Blog Post

Earnings: Phorm Burning Through £1.1 Million A Month

Who says the dot.com days ever ended? Phorm is reducing its cash burn to a hefty £1.1 million a month, after clocking up 51 percent higher annual operating losses of $49.8 million in 2008 – all without yet having any income from anything but interest. Costs boomed in the second half of the year but the company claims to have gotten on top of things in Q4.

What on earth is Phorm spending on? The PDF tells us:-

  • $7.1 million went on R&D
  • but the biggest cost category was $42 million in “sales and administrative expenses”
  • that includes $26.6 million in staff costs…
    • … salaries grew to $15.7 million
    • … and severance compensation was $3.6 million, mostly after scrapping the US-centric directors board.

The company raised $65 million through share placements in March ’08 and finished ’08 with $23.2 million cash in the bank. But that evaporated to just $12.8 million by this May 31, so it had to raise another $24.2 million earlier this month. Until then, CEO Kent Ertugrul’s stake was 18.78 percent, he was the only director-level shareholder listed.

Phorm says the investment will help it “move forward to commercial deployment in the UK and Korea whilst providing funds to support our business development efforts with ISPs in other markets”. In other words, it’s spending big millions to support itself in the hope it can shake off its reputation. It now reckons it “has adequate resources to … continue in operational existence for the foreseeable future“.

The outfit says it has “engagement with ISPs in 15 markets, including eight of the top 10 globally”, but – beyond the completed BT (NYSE: BT) trial, ongoing Korean trial and the on-hold agreements with TalkTalk and Virgin Media (NSDQ: VMED) – there are no other details, only: “Although considerable time has elapsed between announcements with our ISP partners, much work continues to be done in the background.” Results