Citing an "increasingly challenging economic environment", Internet business consultant Sapient announced last Friday it would lay off 720 employees, or 20 per cent of its workforce. The company also said it would close its Sydney office and lowered its first-quarter revenue and earnings outlook.
Sapient executives said in a conference call Friday morning that the company expects to lose between $US0.03 and $0.05 a share on revenue of about $109 million, approximately 20 per cent lower than the analyst consensus estimate of $136 million.
"With a month or so left to go, there's some variability in that number," said Edward Goldfinger, Sapient's chief financial officer. "We noted (on our last earnings conference call) that we didn't get off to the start we'd hoped for in January. As you can imagine from the actions that we're taking, February was even worse than January, and we're not expecting it to get better in March."
The company expects to take a restructuring charge in the first quarter of 2001 of approximately $35 million to $40 million, by closing its Sydney office and consolidating operations in the US. Sapient's first quarter ends March 31; the company is due to report the results in the week of April 24.
The economy has become much tougher than the company expected even five weeks ago, said Jerry Greenberg, co-chairman and co-chief executive officer of Sapient. "There has not been a change in our win-loss rate," since the last conference call with investors in January. "There's been a change in more delayed projects and more cancelled projects," he said.
"People often tell you 'I'll do something in six months'. When someone in this business tells you they're going to do something in six months, if you're really paying attention that's a cancelled project," Greenberg said.
Sapient executives said continued uncertainties visible in the economic environment make further projections for the year impossible.
Sapient shares (SAPE) lost $2.00, or 15.38 per cent, in late-day trading Friday on the Nasdaq exchange, selling at $11.00. The stock traded as low as $8.81 earlier in the day. Like many other companies in the beleaguered Internet consulting business, Sapient is way off its 52-week high of $74.53.