What happened

Shares of Conduent (CNDT -3.87%) dropped 20% on Friday after the business services company backed away from divesting assets. It also reported fourth-quarter results that missed expectations and warned of a revenue decline in 2020.

So what

After markets closed Thursday, Conduent reported fourth-quarter earnings of $0.18 per share, short of the $0.20-per-share expectation. Revenue for the quarter came in at $1.099 billion, slightly above the $1.08 billion analysts had expected.

2019 was a tumultuous year for the outsourcing specialist. Former CEO Ashok Vemuri, who guided the company through its 2017 spinoff from Xerox Holdings, stepped down in May amid a battle with activist investor Carl Icahn. But the stock got a boost in November when new CEO Cliff Skelton announced a strategic review, pledging to explore opportunities to divest assets that he said could command a premium in a sale.

An IT technician running a server maintenance program from a laptop.

Image source: Getty Images.

The review is now over, and Skelton said in a statement Friday that although divestitures were considered, "given the attractiveness of the businesses in our portfolio, we did not find proposals to be sufficiently compelling at this time." Skelton said that shareholders will benefit from having the portfolio intact.

"We have identified a go-forward investment strategy to drive revenue stabilization and sales growth, efficiency opportunities, and increased quality, leveraging a diversified and prioritized approach," Skelton said. "We believe our current portfolio coupled with our transformation efforts and improved leadership will position us well over time to drive both top-line and EBITDA growth."

Now what

Conduent expects 2020 revenue to fall 6% to 8% from the $4.47 billion in sales reported in 2019. Adjusted EBITDA margin for 2020 is expected to come in at between 10.5% and 11.5%, compared to 11.1% in 2019.

Skelton might be correct about the long-term logic of keeping the portfolio together, but investors were clearly disappointed that there wouldn't be a short-term pop from a divestiture. With that now off the table, and other tech stocks soaring, investors are racing for the exits on Friday.