Consultant sees revenues slowing on Year 2000 delays
By Eric Auchard
NEW YORK, Sept 4 (Reuters) - Cambridge Technology Partners Inc. (Nasdaq:CATP - news), a fast-growing computer
consultancy, warned Friday of slower growth as its customers delay spending on new projects to focus on fixing Year 2000 computer issues, prompting a sharp
decline in its stock.
In a conference call with investors on Friday, Chief Financial Officer Art Toscanini said the project delays could cut annual revenue growth to between 40 and 45
percent from the company's traditional rate of nearer 50 percent.
The afternoon conference call -- put together on short notice -- came in response to a decline of more than 22 percent in the Cambridge, Mass.-based company's
stock as word spread of the dampened outlook.
Cambridge Technology stock sank to a new low for the year of $27.375, down $7.78 on the day. It was the second most active issue on Nasdaq, with more than
18 million shares traded.
The sell-off had added impact because it rendered at least temporarily worthless the value of stock options granted to many of Cambridge's 3,500 employees -- a
key factor in retaining highly skilled employees that are in short demand.
Still, in speaking to Wall Street analysts during the call, Toscanini said that near-term business at the computer services firm remained healthy and that he was
comfortable with earnings forecasts for the rest of 1998 and into 1999.
''We see some of our clients looking at their budgets and deferring some decisions,'' Toscanini said of how some customers have recently increased their focus on
Year 2000 repair work instead of starting on new information technology projects.
While the computer consulting and systems integration firm offers Year 2000 fixes, the bulk of its business is devoted to providing new technology services,
software, networking and training to a long list of blue-chip corporate customers.
Toscanini said the company has begun seeing delays on existing projects of up to six months and that as a result previous growth expectations for 1999 now
appeared ''a little bit aggressive.''
He said the company could meet Wall Street's third-quarter revenue estimates for the company of $162 million to $165 million and earnings of 25 cents a share and
fourth-quarter revenues of $182 to $185 million and earnings of 28 cents per share.
He said the company also could meet earnings estimates of between $1.35 and $1.40 per share for fiscal 1999. The consensus among Wall Street analysts surveyed
by First Call Corp. is for the company to earn $1.39 a share in 1999.
The stock's sharp fall was triggered by a report earlier Friday from analyst Mark D'Annolfo of Boston brokerage Adams, Harkness, Hill who downgraded the stock
to attractive from buy and lowered his revenue estimates for 1999.
Concerns about the slower revenue growth had emerged in recent weeks and Cambridge executives began discussing them with investors Thursday, Toscanini said.
The stock price tumble added to declines that have cut the value of the stock by more than 50 percent since mid-July.
''Our business is still sound,'' Toscanini reiterated during the conversation with analysts and investors. ''I am just really disappointed that the market has reacted this
way,'' he said.
''Now, with the drop, you do have a bunch of people who are probably under water,'' Toscanini said of employee options to buy stock at prices that are now higher
than the current market price, rendering them worthless, unless the stock recovers.
In a parallel move, the stock of Cambridge Technology rival Sapient Corp. (Nasdaq:SAPE - news) tumbled sharply on fears it was subject to some of the same
customer technology spending delays that Cambridge Technology had confirmed it was experiencing.
Sapient stock fell more than $8 at one point on Friday before recovering somewhat on Nasdaq to end the day at $33.87, down $2.87 on the day. |
