Scient Cuts 460, Will Post Loss
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Scient Wednesday joined the bevy of Internet service firms cutting staff and restructuring in the face of waning revenues. The company also lowered its revenue and earnings expectations for its third fiscal quarter, ending in December.
In a statement released Wednesday, Scient officers blamed a shortfall in expected quarterly revenue on a "broad-based economic slowdown," increased competitive pressure and "a lack of urgency among Global 2000 companies to immediately fund large e-business projects as well as a slowdown in the funding availability for both VC-backed and enterprise-backed start-ups."
As a result, executives said the company would eliminate about 460 of its approximately 1860 positions, or 24 percent of its workforce.
The company also said during a conference call with investors that it plans to reduce and refocus its core services to concentrate on large enterprise clients, and will close its Silicon Valley and Austin offices, which primarily serve dot-com clients
"The combined effect of these market factors has required swift, corrective action," said Scient chairman and chief executive officer Bob Howe.
While the firm will likely take a one-time charge of $40 million to $45 million for severance and restructuring costs, the cuts and closings are expected to save Scient about $60 million throughout the next calendar year, executives said.
The company also said it would bring in fewer revenues than expected.
Revenues for the December quarter are projected to be about $80 million. Before the restructuring charge, the firm said it expects to post a pro-forma operating loss of about $13 million, or $0.16 per share.
That's quite a difference from what Wall Street had been expecting. Analysts had anticipated the firm to post about $112 million in revenues, and earnings of $0.08 per share.
San Francisco-based Sapient has about $150 million in cash at the end of the quarter, which chief financial officer Bill Kurtz said the company believes will be enough to carry it through to positive cash flow in FY2002.
"While we continue to manage through the market transition, we believe the long term e-business opportunity is very attractive," Howe said. "We believe enterprises continue to view investments in e-business and the value-added services that Scient provides as vital to their success and long-term growth."
In recent weeks, Scient competitors marchFIRST, iXL, Luminant, and others said they will cut jobs and restructure in the face of disappointing revenues.
And earlier this week, Chicago-based I-shop Xpedior said it would cut about 380 of 1,200 employees and close offices in Houston, Los Angeles, San Francisco and Landover, Md.
"There's been a significant and broad-based slowdown in the market that's affected many companies ... we've certainly been affected by this," Howe said to investors Wednesday.
Shares of Scient opened trading Thursday at $2.88, about two percent of the company's 52-week high of $133.75.