interesting article with things to say about ciber....
smartmoney.com
Looking Past Y2K for Bargains
By Joshua Albertson
AT LEAST when Y3K rolls around, there will be a
record of the hysteria that preceded the last turn of the
millennium. Late-30th century researchers performing a
Dow Jones news search will find no fewer than 25,000
stories containing the magic triumvirate, Y2K, in 1998,
along with another 34,000 in the first four months of
1999.
By the time the ball drops on 1999, the Y2K news
count will probably have long topped 100K (even in
America, the metric system lives). That's going to make
a lot of people tune into Dick Clark's New Year's Eve
bash and a lot of others run for cover in rural Montana.
But nobody will be happier to see that shiny orb
descend from the Manhattan sky than the men and
women who lead computer software and services
companies. From Sun Microsystems (SUNW) to J.D.
Edwards (JDEC), Ciber (CBR) to Keane (KEA),
computer companies can't seem to shake the Y2K
blues. And while the enthusiasm over computer-system
upgrades served to pump a stock or two in the early
days of premillennial mayhem, now it mostly just makes them suffer. Boxing enthusiasts might call it a
Y2-KO.
Sun CEO Scott McNealy summed it up neatly last month, when he punctuated his company's
better-than-expected third-quarter earnings release with a warning of an uncertain,
year-2000-diminished outlook for the rest of 1999. "We are heading into what we call Heartbreak Hill,"
he said, "and it's going to look a little ugly across the industry." Sun, a stock star over the last 12
months, fell 17% in two days.
While Sun has recovered fast from its Y2K warning -- the stock trades almost 30% higher than its April
low -- others have been less fortunate. Today's SmartMoney Y2K Recovery Screen aims to identify
some of those less fortunate software and services companies that might be due for some redemption.
Each of the eight companies that made it through the wringer is more than 25% off its 52-week high
despite posting year-over-year sales and earnings growth in each of the last four quarters along with
expanding operating margins. And analysts expect each company to register earnings growth ahead of
its industry peers during the next two years.
Of course, betting on a Y2K-related boost, short or long, has been a
dubious proposition these last three years. And some pundits would
recommend shying away from the entire sector as the moment of truth
nears. But given the rock-bottom prices and the fundamental strength
coloring this octet, there's got to be a bargain in the batch.
One of the saddest sacks on the screen scene is Ciber, an Englewood,
Colo.-based information-technology-services outfit. Down 25% this year
and almost 50% since touching 40 last summer, the company's image
as a Y2K-embattled IT staffing firm seems to cling to it like a stubborn
line of legacy computer code.
In early March, Ciber execs decided the declining-stock madness must stop. They issued a press
release stating that "management is of the opinion that the recent decline in the price of its common
stock is not related to any business conditions or developments of the company." Gone were the days,
the release explained, when the company focused on IT staffing, a now out-of-favor business. And
gone, as well, were most of the Y2K-induced revenue streams. Meanwhile, business was robust. "Now,
more than 60% of our service revenues are from solutions-oriented contracts and less than 5% of our
revenues are Y2K related," the company implored.
Alas, Ciber trades lower today than it did after that dismal, press-release-inspiring trading session in
March. Not even a better-than-expected earnings announcement in April, replete with a 52% jump in
net income and a 25% rise in revenue, could boost the stock.
The problem, at least in part, is that each time Ciber looks ready to break out, another one of its
computer-services peers stumbles. So, when Keane told analysts to reduce 1999 estimates in April
thanks to Y2K slowdowns and other debilitating macroeconomic factors, Ciber continued to sag in
sympathy.
Meanwhile, as its stock price languishes, some observers are wondering whether Ciber will be able to
maintain its voracious acquisition binge. The stock-as-currency strategy has turned many technology
companies into giants during this bull run.
Still, it's hard to argue with Ciber's numbers: 72% earnings growth in 1998, 41% revenue growth,
operating margins almost two percentage points higher than the industry average. Wall Street's
projections call for net income to rise more than 30% during the next two years. And at 14 times
calendar 2000 estimates, Ciber is as cheap as it's been in some time.
Perhaps none of this will be enough to quell the Y2K fears. And some of the fears may even be
realized: corporations may stop spending on non-Y2K-related IT projects as 2000 nears; services
companies may struggle to maintain relationships; the stock market may trip and fall, giving back all of
its bull-market gains. But sometimes it doesn't hurt to go looking for bargains when the doomsday calls
are peaking.
Who knows? When the Y3K enthusiasts look back, they might be able to study the buying opportunity
that dawned on the cusp of the second millennium. |
