I find this article to be interesting mentions NAVIDEC...
December 28, 1999
TALES OF THE TAPE: TeleTech On Roll, Ford Deal Huge
By TOM LOCKE
DENVER -- TeleTech Holdings Inc. (TTEC) is on a roll, and there are signs it may just keep on rollin'.
For one thing, there's the joint venture with Ford Motor Co. (F) that the Denver outsourcer of customer management announced in November. That venture may end up producing yearly revenue of as much as $1.5 billion within five years, three times the $500 million in yearly revenue that at least one analyst has estimated for the joint venture by 2003.
And TeleTech is talking with "several others" about joint ventures, and several are bigger than the Ford venture, Chief Executive Scott Thompson told Dow Jones Newswires. He is not close to making such a deal and doesn't expect an announcement in 2000, but "it's possible," he said.
Third, TeleTech plans a number of high-profile announcements after Jan. 1 about technological partnerships involving integrating products, going to market together, expanding channels of sales, and creating "a truly integrated e-commerce platform," Thompson said.
TeleTech, with 13,700 employees, historically has been known for providing inbound telemarketing services for companies - answering and handling customer calls on 800-numbers. But TeleTech has been rapidly shifting to becoming an electronic-commerce infrastructure company - combining telephone, e-mail, Web browsing, fax and other communications into an integrated system and providing end-to-end e-commerce services.
That means offering everything from building a Web site, to attracting customers, converting Web browsers to buyers, fulfilling orders, and managing data to enhance selling.
For instance, TeleTech's technology can detect a person browsing a Web site and send a pop-up message to him offering assistance. Or maybe a discount.
In the third quarter, e-commerce made up 20% of TeleTech's revenue of $126.1 million. It had increased 68% compared with a year ago, almost twice as fast as the 37% growth in revenue for the company as a whole.
New Company Name Is A Possibility, Says CEO
Because of the shift to e-commerce, there may be a name change from TeleTech, which has a teleservices connotation. The company will decide on whether to make a name change in the first or second quarter of next year, Thompson said.
All those possibilities on the horizon come after a flurry of recent activity that helped the company's shares hit a 52-week high on Monday of 33 1/2. That's six times higher than the 52-week low of 5 9/16 it hit in March. And it's 109% higher than the closing price of 16 1/16 on Nov. 15, the day before the Ford announcement. Tuesday afternoon, the shares were up 1/2 at 33.
Once Wall Street realized the magnitude of the Ford deal, the stock jumped, said Janco Partners analyst Stacy Forbes. On Nov. 17 it jumped nearly 5 points, to 21 3/4.
But the Ford deal may be considerably bigger than what Forbes is forecasting.
She estimates that the joint venture, which is 55% owned by TeleTech and 45% owned by Ford, will generate operating income of $3.5 million on $30 million to $35 million in revenue next year. Assuming a 40% TeleTech tax rate and 64 million diluted shares, Forbes estimates a contribution of 3 cents a share to TeleTech in 2000.
But she expects rapid growth, so by 2003 she is forecasting $500 million in joint venture revenue and $70 million in operating income, adding 34 cents to TeleTech's earnings per share (assuming 67.8 million diluted shares).
And the ramp-up could be much faster. Thompson called Forbes' 2003 revenue estimate "very conservative." Ford has $1.5 billion in yearly business that is customer care and e-commerce infrastructure, and 60% to 65% of it is outsourced. He foresees the joint venture, which will have preferred vendor status, getting much of that business. And since that business will grow, he said, the joint venture could reach $1.5 billion in revenue. "To get there it would probably be over a five-year time horizon," Thompson said.
Can it get there? "It's certainly my hope," he said.
Management Additions, Other Announcements Also Aid Stock
TeleTech stock has been surging not just because of the Ford deal, but also because of a series of announcements, including the Nov. 23 announcement of a long-term contract award from Blockbuster Inc. (BBI) to TeleTech to provide customer and technical support for blockbuster.com.
And management additions have helped, he said. Thompson was named chief executive and president on Oct. 18, and Michael Foss was named chief financial officer Nov. 29. Founder Kenneth Tuchman remains as chairman of the board.
David Kern, a principal in New York-based Kern Capital Management, said TeleTech brought in "very, very strong operational people," and they are a "great complement to Ken Tuchman's capabilities." They will free Tuchman to concentrate on building client relationships, he said.
Kern Capital first started buying TeleTech shares in the early summer of 1998, paying 15 and buying for less later. "I saw the opportunities in terms of a converging world," said Kern. TeleTech's expansion beyond teleservices, expectations of improved profit margins, and large new clients such as GTE Corp. (GTE) appealed to him.
And although TeleTech shares have jumped lately, Kern said he is holding the shares for the long term. TeleTech has strong opportunities and the stock valuation is "not all that high relative to any of the other companies," he said. "I'm actually excited about where the company is currently positioned."
According to Thompson, TeleTech is positioned for revenue growth of 30% to 40% a year and earnings growth that is faster than that because profit margins are expected to improve. But he and investor relations vice president Michael Klatman declined to comment on First Call/Thomson Financial consensus earnings-per-share estimates of 12 cents for the fourth quarter, 40 cents for 1999 (compared with 32 cents in 1998), 54 cents in 2000 and 79 cents in 2001.
But Thompson did note that, in addition to e-commerce, he is focusing on efficient spending. Operating margins have already improved this year from 7.1% in the first quarter to 7.6% in the second quarter and 8.7% in the third quarter.
Thompson expects continued improvement because of attention to costs, higher margins at the Ford joint venture and in e-commerce, and higher use of call center capacity.
Overcapacity has hurt TeleTech in the past. Founded in 1982 by Tuchman, it went public in August 1996, issuing 4 million shares at 14 1/2, and rose above 40 in September. But in 1997 its shares dipped to about 10 as margins were clobbered as one large client, AT&T Corp. (T), cut back spending, and another large client, United Parcel Service of America Inc. (UPS), was hit by a strike. And margins stayed depressed in 1998 because of ongoing investments in technology and in international expansion, Forbes said.
Regarding capacity, Thompson said TeleTech is taking a just-in-time approach to call centers, reacting to demand with construction times of 90 to 120 days. At year-end, he said, "we really don't have a capacity issue at all."
That's partly because of heavy demand, including many "dot-com" companies, he said. One that already has chosen TeleTech is DriveOff.com, a unit of Navidec Inc. (NVDC) that sells and leases vehicles over the Internet. DriveOff spokesman Andy Mountain said it is much more cost-effective to outsource communications with customers and auto dealers to TeleTech. Plus, with a dedicated TeleTech staff to DriveOff's business and three DriveOff managers working at a TeleTech call center, DriveOff has lots of control. "We've been extremely pleased," he said.
That kind of response may explain TeleTech's pipeline of new business. For 2000, it is "probably the most robust pipeline in TeleTech history," Thompson said, and provides "good cover" for 2000 revenue estimates.
So what are the risks for investors in TeleTech? "Not buying early enough," Thompson said.
- Tom Locke; Dow Jones Newswires; 303-293-9294 |
