Sapient Reports Continued 1Q Losses; Revenue Down 54 Percent

Sapient

For the quarter ended March 31, Sapient reported a loss of $54 million, or 43 cents per share, on sales of $50 million. That compares with a loss of $48.3 million, or 39 cents per share, on sales of $109 million for the same period last year.

Wall Street analysts polled by First Call estimated a loss, before charges, of 13 cents per share. That's slightly more optimistic than the loss, before charges, of 16 cents per share reported by Sapient. The company closed trading Thursday down 3 cents, at $4.61 cents per share.

Charges include $48.7 million in connection with restructuring, announced in February 2002, when the company let go 545 employees. In addition, Sapient said the effect of new tax legislation, which allows companies to carry-back losses for an additional three years, was excluded from the net figures.

"We're not pleased with the performance," Jerry Greenberg, co-CEO of Sapient, told investors during a conference call to discuss the results.

Contributing to the steep losses, Greenberg said three large projects Sapient thought it had secured were postponed, one for two months and another for six months. Market softness amid the uncertain economy, he said, continues to contribute to longer sales cycles, project postponements and fierce competition.

Particularly hard-hit services areas include financial services and energy services, said Greenberg. There was some growth in the automotive services area, but not nearly enough to offset the losses, both here and in Europe, he said.

Competition remains fierce, with companies at the table ranging from all the big players to small companies not previously on the radar screen, said Greenberg. "And often times there are 10, 15, 20 competitors in a given situation," he said. "So, it's highly competitive."

Greenberg didn't mention the status of Sapient's outsourcing operations in India until pressed by analysts. Even when asked, he remained vague, saying only that the company has about 600 billable professionals in India. "We haven't commented on the profitability of the India business because it's really not a business by itself," said Greenberg.

He did say, however, he will move to peel back by about the beginning of next year funding for 60 Sapient expatriates now working as U.S. citizens on mission-critical projects for clients in India.

Sapient began scaling up outsourcing operations in India last July when the company said it would lay off nearly 400 U.S. employees and shift its strategy to a "global distributed delivery model." At the time, Greenberg reported 250 employees in India. Even at that time, however, Greenberg was admittedly vague about operations. He attributed not being "overly open" to a desire to keep strategic information from the competition.

Looking forward to the second quarter, Sapient said it expects challenges to continue and revenue in the $40 million to $42 million range.