To: Ken M who wrote (32) | 2/10/2000 1:57:00 PM | From: Ken M | | |
(COMTEX) B: Tampa, Fla., Call-Center Operator Revises Earnings Report B: Tampa, Fla., Call-Center Operator Revises Earnings Report, Expectations Feb. 8 (St. Petersburg Times/KRTBN)--TAMPA, Fla.--Confirming the fears of investors and analysts, Sykes Enterprises Inc. restated its earnings for 1999 and severely cut its expectations for 2000. The Tampa operator of call centers made the changes grudgingly after auditors questioned how the company recorded software revenue in some service contracts. Sykes' stock price tumbled 21 percent, or $3.683/4 cents, to $14.25 Monday, the third significant jolt in less than two weeks. The value of Sykes' shares has been sliced by nearly three-quarters since trading at a one-year high of $52.25 just three weeks ago. The first blow came Jan. 25 when Sykes warned that it would miss fourth-quarter earnings projections by at least 40 percent. The stock plunged more than 50 percent. Then on Feb. 1, shares fell another 33 percent after the company delayed the year-end earnings report because the auditors had not finished reviewing financial statements. And the outlook is not good for a quick recovery. During a somber conference call Monday with investors and analysts, the company said it still has not resolved its accounting problems with auditors Ernst & Young LLC. The call, in fact, left analysts with more questions than answers. "It's very difficult at this point to get your arms around everything that happened," said Steve Toomey, an analyst with George K. Baum & Co. in Kansas City. For John Sykes, chairman and chief executive, the pain of the sudden turnabout was evident in his voice during the conference call. "The past few weeks have been the toughest in the history of our company," he said. But the problems date back to the second quarter of 1999. That's when Sykes started offering technical support over the Internet. It was a radical change for a company that had always provided support to customers of companies, such as Microsoft Corp. and Apple Computer Inc., through a network of call centers around the globe. The company answers more than 250,000 questions a day. Sykes developed software called AnswerTeam that allowed customers to diagnose computer problems on their desktops. The company bundled the software with its traditional service in some contracts that were up to five years in length. The company recognized the revenues from the software immediately after signing a contract. Meanwhile, the revenue from the technical support over the phone would be realized throughout the length of the contract. But Ernst & Young, during its review of year-end results, disputed Sykes' accounting of the software revenue. The auditor told the company that such revenue should be prorated over the term of a contract. So the company removed about $32-million from its 1999 revenues. In the second quarter, the restated results are as follows: Net income of $4-million, or 9 cents a share, on revenue of $134.1-million. Sykes had previously reported net income of $11.5-million, or 27 cents a share, on revenue of $146.1-million. The revised third-quarter net income is $4.3-million, or 10 cents a share, on revenue of $141-million. The company previously reported net income of $14.1-million, or 33 cents a share, on revenue of $161-million. In the fourth quarter ended Dec. 31, earnings before a onetime charge was $7.4-million, or 17 cents a share. Sykes took a pretax charge of $6-million to write off technology that it bought from another company, which lowered net income to $3.7-million, or 9 cents a share. Revenue rose 15 percent to $163.6-million from $142.4-million. A year earlier, in the fourth quarter of 1998, Sykes reported net income of $3.2-million, or 7 cents a share after onetime charges. Although the company followed the auditor's advice and restated earnings, it did so reluctantly. The Ernst & Young accountants "are making interpretations based upon what they know," Sykes said. "Now, I don't fault them for that. I just don't agree with them." Sykes did not comment beyond the conference call. A phone call to Ernst & Young's office in Tampa was not returned. But the lack of certainty about how Sykes will recognize software revenue in the future left analysts and investors baffled. They have little confidence in the company's forecast for 2000. The company said it expects revenue of $735-million and earnings per share of $1.10 a share, 31 percent below its original forecast of $1.59 a share. Sykes also added that it will hire an investment bank to review options for its poorly performing health-care unit, SHPS Inc. In 1999, Sykes earned 60 cents a share on revenues of $575-million after restating its results and before onetime charges. During the call, analysts tried to clarify the accounting issues. But the company refused to answer questions about 1999 results. Sykes apologized several times for the lack of candor, explaining that he was following orders of the company's lawyers. The company is defending several shareholder lawsuits filed last week, accusing the company and some of its senior officers of issuing misleading statements regarding the financial condition of Sykes. Several analysts and investors chastised the management for its evasiveness. "I must humbly suggest to you that your lawyers' advice about not talking about 1999 is extremely detrimental to the credibility of a company," said James Ruf, a money manager in Connecticut. Analyst John Mahoney said the call was "pretty grisly." But he said he does not think the company intentionally attempted or committed any accounting fraud. Still, he and other analysts said the troubles of the past few weeks highlighted the need for Sykes management to put better controls in place. "The company was unfamiliar as to how certain rules and practices worked within that segment," Toomey said. "You've got to make sure you truly understand what's going on." By Ameet Sachdev -0- To see more of the St. Petersburg Times, or to subscribe to the newspaper, go to sptimes.com (c) 2000, St. Petersburg Times, Fla. Distributed by Knight Ridder/Tribune Business News. SYKE, MSFT, AAPL, END!A20?PT-CALL-CENTER *** end of story *** |
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To: Arrow Hd. who wrote (36) | 8/2/2000 7:17:57 PM | From: John Ritter | | | The stock seems strong, I expect SYKE will go back through $22, but have lowed my target to $25, didn't like that last downdraft, eventually the stock should get back to $50 if you want to hold it for a couple years...but you never know, it is all a gamble...of further surprises... |
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To: John Ritter who wrote (39) | 8/17/2000 6:20:21 PM | From: Arrow Hd. | | | John, sorry for the delay but have been traveling this month. I think MCTR has more settling to do especially with the delayed filing but once all that is behind them and the news can be digested it will have its exhaustion low sometime between now and the end of October and that could be mid-single digits. |
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