The Company lost $1,483,000 from operations in the quarter compared with earnings from
operations of $553,000 in the first quarter of 1998. Operating results were
adversely affected due to pressures arising from low rates of employee utilization in the
offshore technology resource center and a less profitable mix of business.
Demand for Year 2000 services is diminishing, and pressure on the Company's margin is
continuing; accordingly, the Company's profitability in the second quarter will
be adversely affected.
They said what they had to say, in spite of the "silent period",
which they've somehow managed to extend from 30 days to several
quarters. They're losing money, rather than getting rich on a Y2K
bonanza, as many speculative investors had hoped. The revenue had
a 13% drop compared to a year ago. The costs of the revenue were
about the same - just slightly higher. So even if no new sources
of revenue are forthcoming in the short term, if they can get the
costs in line with the revenue, they can stem the loss. With $17M
cash on hand and $25M total assets, compared to a $1.2M loss in
the quarter ($1.5M loss from operations) they are not in danger of
going under any time soon.
So the big decision has to be whether or not to ditch the India
operation. They can cut their losses and presumably get some cash
as well, or they can wait out this period of uncertainty. It may
be that many companies are holding off on new projects until after
they have the Y2K problem comfortably behind them. This they can't
be 100% sure of until well into next year. Even if a company's own
systems can be proved to be "compliant", they still can't be sure
if they'll have trouble with their suppliers or their customers or
with a general Y2K-related economic downturn, so they may want to
sit on their cash and wait and see. If this phenomenon is in effect,
(of which I only speculate, having no evidence), then there could
be a pent-up demand released next year, at which point the capacity
from the India operation could be useful.
In the meantime, I have to marvel at a stock where the shareholders
have $3.80 equity for a sub $2 price. |
