Fool.com: Cambridge Technology Trying To Maintain Momentum (News) October 25, 1999

Cambridge Technology Trying To Maintain Momentum

By Dave Marino-Nachison (TMF Braden)
October 25, 1999

"Simply put," reads the text of computer consulting firm Cambridge Technology Partners' (Nasdaq: CATP) website, "we get it. We're doing it. And we won't let you fail."

That's a note to customers, not investors -- which is too bad, since the latter group could probably use a little propping up after a simply dismal 1999. It didn't come today, as the company reported third-quarter earnings, discussed its near-term outlook, and issued an update about the state of its ongoing restructuring efforts.

Cambridge has been busy repositioning itself as a provider of Internet-related business services, something many believe could have been done sooner to avoid lagging its competitors in growth and service offerings.

There are some positive indications at Cambridge, where third-quarter and nine-month e-business revenue growth has been encouraging amid less-impressive or even backward-moving figures at the company's traditional divisions.

But those figures could probably have been even higher were it not for exceedingly high employee turnover that has hampered Cambridge's efforts to fully redirect itself toward e-business. Cambridge expected turnover of about 20%, according to CEO Jack Messman, but it's been higher and as a result the company has had to restructure the way it pays its people: Bonus payments for 1999 will be boosted significantly and will include a performance-based component.

The company is also training and retraining employees and creating a new set of career paths Cambridge hopes will get it back in line with its competitors. If employees don't buy into Messman's vision, the results could be disastrous. Meanwhile, Cambridge is upgrading its operating systems and realigning the way it deploys and arranges its workforce, creating "industry solutions" groups with specialties and vertical expertise.

That will come with a price, though, and when combined with Y2K-related project delays and a slowdown associated with PeopleSoft (Nasdaq: PSFT) implementation -- that's a dominant component of Cambridge's traditional business -- the earnings outlook for the next few quarters is murky at best.

Cambridge expects revenues for the fourth quarter between $150 to $155 million -- last year's figure was approximately $160 million -- and the company now expects a loss of $0.28 per share or worse when a $12 million to $15 million charge for the new bonus program is figured in. And that number could end up even lower, Cambridge said, as it continues its budget process.

Still, Messman -- who came aboard this summer -- is optimistic. "We are re-energizing this organization and taking the necessary steps to rebuild our momentum and address our competition head-on," the CEO said. "Our clients, shareholders, and employees should all benefit from our decisive actions."

Working in his favor are the company's respectable industry position, broad selection of offerings, and a clean balance sheet that should help the company withstand any tough times. If Cambridge can hang on to its key personnel and maintain its e-business momentum, a return to better days for Cambridge shareholders could be on the way.

Related Links:
Cambridge Technology Partners Web page
Cambridge Technology Partners message board

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