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Friday, September 19, 1997
ATC Communications
HOW DID IT FIND TROUBLE?
The company shocked the investment community back in February with an unexpected
earnings shortfall. When earnings are going to fall 60% shy of estimates,
most companies pre-announce the downfall or give analysts downward guidance.
ATC did neither. One would think they could have picked up the phone and
called. After all, that is their business.
Balance Sheet
Ratios No player was growing as fast as the smaller ATC, whose shares had grown fivefold by that time. But the company had the foot pressed hard on the accelerator and the engine was certain to give out. As ATC began busting at the seams, the company soon found itself with a new chief executive officer in November and a new chief operating officer this March. The changes at the top gave some of ATC's larger clients cause for concern. AT&T was already concerned that it made up almost half of the company's revenue base. While the company assured AT&T that it would diversify through acquisitions, making the telco giant a smaller part of the revenue mix, AT&T came up with a different way to accomplish the same thing. Revenue from AT&T this year is off 10%.
In addition, the company lost its GTE business, which was not a major client
to begin with, when the communications heavy decided to do its own telemarketing.
While ATC has kept most of its accounts, like Pacific Bell and American Express,
the explosive growth many expected from of the sector failed to materialize.
Shares of APAC have been hit just as hard. Recognizing its shattered share price, the company is also working on a share repurchase plan and will not hesitate to incur debt in the process. Then again, the company is no stranger to leveraging its interest in the company. Recently the Chairman had to sell some of his shares when he received a margin call from his personal broker. While ironic to find a company borrowing money to buy back shares at the same time that its board chief is paying the price for doing the same thing, it at least lets the investment community know that ATC's management feels the stock is undervalued.
-Rick Aristotle Munarriz
WE DELIVER
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