Business

Watertown-based athenahealth laying off about 500 employees

An Athenahealth worker processed paperwork in 2009.
Pat Greenhouse/Globe Staff/File 2009
An athenahealth worker processed paperwork.

Athenahealth Inc., the digital health care services company in Watertown, is eliminating about 500 jobs as part of a cost-cutting plan detailed Thursday in the face of pressure from an activist investor.

The company said the job reductions would amount to 9 percent of its workforce, but it did not say how many of the cuts would be in Watertown, where it is the largest employer.

Athenahealth, which has about 5,600 total employees, also plans to close two offices, in San Francisco and Princeton, N.J. Its other locations are in Belfast, Maine; Austin, Texas; Atlanta; and India.

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In a conference call with analysts and investors Friday morning, chief executive Jonathan Bush said the job cuts were targeted at redundant positions, and middle management. He said he was concerned over how the company’s workforce would handle the turn of events.

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“My concern in this process was one of cultural impact. Would this demoralize? Would this demotivate? Or would this inspire? And I am extremely pleased and confident that the answer is the latter,” Bush said. “We have an extraordinary collection of colleagues that are in this for the mission, and they want that mission even at the expense of hard decisions.”

The company, which helps clients track performance, process claims, and manage health care administration, said in August that it planned to cut expenses by at least $100 million. But it had, until Thursday, given little indication of what it might do to reduce the costs.

The company also said over the summer that Bush would give up his additional roles as chairman and president.

Athenahealth has been a target of Elliott Management Corp., a New York hedge fund controlled by billionaire Paul Singer, which said in May that it had bought a 9.2 percent stake in the company.

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At the time, Elliott Management cited “numerous operational and strategic opportunities to maximize shareholder value.”

In his remarks Friday, Bush said he is grateful to investors for “helping us find our way.”

The company’s stock had been trending downward in spite of a strong market before Elliott Management announced its involvement, sparking a sharp rise. After a period of relatively strong performance, the stock had begun to drop again in recent months.

The company’s stock jumped in early trading Friday, hitting around $130 a share after closing at $116.41 the day before.

The company confirmed the layoffs as it released its earnings report after the close of trading. Its net income was $13 million for the third quarter, down from $13.9 million in the same period last year.

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The company said it expected to take between $15 million and $25 million in charges, largely related to the reductions, in the fourth quarter of this year. It said it “remains committed to significantly increasing operating margins in 2018.”

Athenahealth has invested heavily in Watertown, where it has been moving forward with a plan to rebuild its headquarters as part of a massive office complex at the Arsenal on the Charles project.

The company has received state assistance contingent on its expanding its workforce in Watertown.

The company did not say whether it would make any changes to the Arsenal project. But Watertown’s development and planning director, Steve Magoon, said Tuesday that athenahealth had given no indication there would be trouble with the project.

Mark S. Sideris, president of the Town Council, said he was confident athenahealth would continue to be a major economic force in the community despite the layoffs. He said the company employed at least 2,300 people there at his last count.

“There’s always a concern when you hear about layoffs in a community that had been growing by leaps and bounds since they’ve come to Watertown,” he said. “They’re our largest employer here. Whatever they do, I follow very closely.”

Andy Rosen can be reached at andrew.rosen@globe.com. Follow him on Twitter at @andyrosen.