Scient Exploring Options After 1Q Loss

Scient iXL

For the quarter ended March 31, Scient reported a loss, before charges, of $5.3 million on sales of $21.1 million. In the fourth quarter, the company lost $55 million on revenue of $20.8 million.

Formant noted that revenue was up slightly from the fourth quarter, but said the company is actively pursuing "strategic alternatives" that include a possible merger or business combination, as well as a capital infusion and the sale of equity investments.

"We cannot guarantee that any of those alternatives will come to fruition," Formant said during the analysts call. "No matter what comes to pass, our goal is to create a growing and expanding world-class organization."

Scient prohibited the typically standard question-and-answer portion of the earnings call.

Wall Street is paying little attention anymore to the once high-flying consultancy. Scient closed trading Monday at 19 cents per share, and stayed unchanged following the call Tuesday in late morning trading.

"We, as I am sure many of you are curious and interested in the stock's recent dramatic fluctuations," said Formant, former CEO of iXL. "However, we do not have any control over our stock's trading activity, nor can we offer any insight into why it has been so erratic."

Formant did say the company plans to ask stockholders at their annual meeting on May 29 to approve a reverse stock split in a ratio of 10-to-1, 15-to-1, or 20-to-1. It is not clear whether that move, if approved, will satisfy Nasdaq, which served Scient earlier this year with a delisting notice for failing to meet the $1 minimum bid price for 30 consecutive days.

Formant, meanwhile, stressed his vision of Scient as a new company with a "new, lean cost structure, revenue growth in the right spots, and more nimble than the big guys," and blamed comparisons to the company's dot-com heyday as an unfair stumbling block.

"It's time to stop looking backward at what Scient was and start looking forward at what we are today and what we can be," said Formant. "Concerns about viability have held this company back, not capability."

In addition, Formant said while the company still has a lot more work to do, he believes the slight uptick in revenue, along with several new client wins, are positive indicators.

"We have passed an important test of endurance," said Formant. "We delivered on our promises, and have reframed and repositioned our focus."

In early April, Scient secured a $9 million term loan aimed at supporting the company's near-term cash requirements. Scient reported that during the first quarter of 2002 the company used a net $4.5 million in cash for operating needs, and further used $10 million to settle severance and other obligations.

As of March 31, Scient reported $10.8 million in cash, of which $4.6 million was restricted.

Scient completed its merger with iXL on Nov. 7, 2001. The merger was billed as a deal to foster financial stability and create a stronger e-business solution provider with complementary business strengths and technical skills.

Before the merger, both companies--once considered high-flyers in the e-services market--had reported millions in losses, laid off hundreds of employees and consolidated offices to cut costs amid a sharp decline in market demand and a slowing economy.