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Even Sapient Corp., the proverbial bellwether of the e-services consulting space, has felt the chill.
Although the companys Q4 results were in line with its previously lowered estimates, Sapient has shown it is not immune to the slowdown in corporate IT spending.
Regardless, the company still produced better Q4 results than its competitors, many of which posted losses and enacted layoffs. For the quarter ended Dec. 31, Sapients net income fell to $8.12 million, or 6 cents per share, compared with $9.5 million, or 7 cents per share, a year ago. Sales rose 70 percent to $139.2 million, from $81.8 million in the year-ago period.
Among Sapients rivals that were hobbled by the quick change in market conditions is Scient, which reported a $58 million loss for the fourth quarter.
Hazy Outlook Like many of its competitors, Sapient is seeing a corporate atmosphere, dotted by uncertainty, in which IT and consulting projects have been delayed. That uncertainty also has crept into Sapients January period, company executives say.
“The key is the economic uncertainty,” says Jerry Greenberg, co-chairman and co-CEO at Sapient. “The most important thing is, things have not taken off as strongly as we would have wanted, but they have not fallen off the cliff,” says Greenberg. “In Q1, it will be tough going.” But its important to note, says Greenberg, that some customers are pushing forward on projects. However, he adds, the situation varies by region and industry.
For the quarter, the companys top five clients generated about 29 percent of revenue. And, to trim costs, the company closed its six-month-old Minneapolis office, says Sapient CFO Ed Goldfinger.
What Customers Want One of the troubling aspects that affected Sapients operating income was that its workbench yielded utilization rates of only 50 percent, compared with 69 percent in the same quarter last year. Revenue per billable consultant dropped to $220,000 from $254,000, Goldfinger says, adding that the average project size was in the $7 million range.
Given the present outlook, Goldfinger says the company expects revenue for 2001 to come in between $600 million and $640 million. Even with that forecast, the company is playing a proactive role internally and is focusing on hiring senior managers in business development, technology and program management.
Taking Inventory Sapients Greenberg explains that the next level of opportunity in e-consulting is going to come from designing solutions that tie into a customers supply chain.
In this type of consulting play, Greenberg sees a tight fit between CRM and supply-chain management technologies. “We are not just dealing with the customer and buying experience. Were also looking at the inventory,” says Greenberg.
Some global customers, he says, are looking to rack up a billion dollars in savings by managing their inventory costs. To get there, clients are looking for strategic consulting, he adds.
For Sapient, the short-term picture is hazy, causing the company to be more conservative in its outlook.
Moreover, Greenberg is not expecting the cloud of uncertainty to clear up overnight. Instead, Sapients co-founder is looking for a more lucid vision from his customers. “The uncertainty doesnt have to get better. It has to get clearer in [terms of] the context [in which] they are making their decisions.”