MarchFIRST Misses Street by Wide Margin, Cuts Q1 Estimates
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Internet consultancy marchFIRST, one of the industry's largest players, continued its string of bad news Monday, posting a worse-than-expected performance in fourth quarter 2000 and for the overall year -- including a staggering $6.8 billion net loss.
That net loss included one-time charges such as merger costs, severance charges, and investment losses.
Excluding those charges, losses for the quarter totalled $73.2 million, or $0.40 per share, on revenues of $213.5 million. The Street expected a loss of $0.30 per share, according to Thompson Financial/First Call consensus.
For the year, revenues were $1.2 billion. Net loss without charges was $8.0 million, or $0.06 cents per share. Analysts had expected the firm to post earnings of $0.08 per share for the year.
The worst news, at least from an accounting standpoint, is marchFIRST's massive one-time charges adding up to a whopping $6.7 billion. That brings the company's net loss to $37.09 per share for the quarter. Those charges also weigh heavily on the year's performance, recording a loss of $7.7 billion, or $53.27 per share for 2000.
Those charges come principally as a result of a write-off of $6.5 billion in intangible assets, due to the precipitous decrease in market value of the merger between Whittman-Hart and USWeb/CKS, which formed marchFIRST last year.
The company also wrote down a charge of $143.2 million from losses on sales of securities and write-downs of its venture capital and investment portfolios. The company also provided reserves of $62.4 million against its accounts receivable in addition to its standard provision based on revenues for the quarter.
The company also recorded a charge of approximately $48.9 million for workforce reductions and restructuring costs.
This isn't the first time marchFIRST missed analysts' estimates -- in November, the company posted third-quarter earnings of $0.01 cent a share, or $0.19 below Street predictions.
MarchFIRST also reduced its guidance for the first quarter of 2001, saying it expected to post a per share loss of $0.22 to $0.31 for the quarter. The Street had been expecting a loss of $0.05 per share.
In addition, the company said it would take a charge of $81.1 million for first quarter, as a result of continued restructuring costs.
"We continued to see demand slow throughout the fourth quarter," said marchFIRST chairman and chief executive officer Robert Bernard. "We believe our clients are committed to their strategic business initiatives, yet concern over the recent economic slowdown has caused them to spend cautiously."
"Clearly, market conditions are difficult, but we've taken decisive steps to move the company forward," he added.
Since its poor showing in November, those steps have included the cutting of about 2,100 employees, the closing of its Montreal office, consolidation in its Pittsburgh office, and the canceling of future leases in New York and San Francisco.
Bernard said these efforts would cut $300 million to $400 million from its annual expenditures. The company also said it would reduce capital expenditures by about $158 million, to about $15 million in 2001, although it did not discuss specifics.
Executives said the company would also mount a comeback thanks to its strategic plan, which it discussed last quarter but now calls the "m1 Solution," and which Bernard described as "client-focused" and "industry-specific." In November, the company said it would be narrowing the types of clients it works with, and would focus more on e-services and marketing-consulting work.
"We believe that the cost reductions we announced recently, combined with the new m1 Solution, will put marchFIRST on track to reach our goals in 2001," he added.
Shares of MRCH were trading down 10 percent