Baltimore needs radical surgery â¿“ Rooney

Baltimore Technologies, the foundering internet security business and former stock market high-flier, shocked investors yesterday by admitting it needed radical corporate surgery to stem the dramatic flow of cash out of the business.

Fran Rooney, the chief executive, refused to give precise details of its cost-cutting plan but acknowledged that job losses would be "very significant".

Analysts expect Baltimore to axe at least 250 of its 1,150 workforce in addition to the 250 job losses it revealed in May. It wants to cut costs by £30m and £35m a year.

"We have to make very tough decisions, very radical decisions on the way we manage our costs," Mr Rooney said.

Investors and analysts were alarmed at the extent of Baltimore's cash burn, which almost doubled to £30m in the second quarter, leaving £54m in the bank. Analysts said there was a serious risk that the company will run out of funds before it breaks even, forecast for the second quarter of next year.

"I can't believe how much cash they are getting through," said one analyst who asked not to be named. "I am very worried that they will have to go back to the market to raise new finance. That would prove almost impossible, given the complete lack of interest in technology paper at the moment."

Paul Sanders, the finance director, insisted that the company had "no plans at the moment to seek further cash resources" and called rumours suggesting that the company has sought alternative finance sources "pure speculation".

Mr Rooney also warned yesterday that revenues in the second quarter would fall short of analysts' expectations and predicted that Baltimore would report just over £15.5m for the three months to June. It made £16.2m in the previous second quarter, and analysts had been looking for about £20m this time.

The chief executive said the company was "operating in a difficult trading environment", with the second quarter proving "particularly tough" as customers delay payment.

Shares in Baltimore fell 8p to 17p yesterday. If they fall a further 3.25p, Baltimore will join the swelling ranks of business that have seen 99 per cent of their market value wiped out since the technology bubble burst last year.

Baltimore will reveal the full details of its cost-cutting plans next month, along with second- quarter and first-half results.