DiamondCluster Reports Continue 3Q Losses Amid Weak Environment

DiamondCluster International, a management consulting firm based here, reported continued losses during its third quarter. Company executives blamed the losses on restructuring, deep cost cuts and a weak market.

Mel Bergstein, chairman and CEO, told analysts during a morning Webcast call that $4 million in expense and cost cuts improved operating results, but projects continue to be small and sales cycles unpredictable.

"We are still in the midst of a challenging environment," Bergstein said.

For its fiscal year 2003 third quarter ended Dec. 31, 2002, DiamondCluster reported a loss of $20.9 million, or 67 cents per share, including restructuring charges, on sales of $30.1 million. That compares with a loss of $43.1 million, or $1.39 per share, on sales of $36.2 million for the same quarter in 2002.

Wall Street analysts predicted a loss, before restructuring charges, of 9 cents per share, according to First Call/Thomson Financial. Shares of DiamondCluster were trading down at $2.47 per share from a Monday close of $2.69, following the announcement of third-quarter results. That trading price is up from a 52-week low of $2.01 per share, and off significantly from a 52-week high of $13.66 per share.

Bergstein told analysts DiamondCluster will try to improve its performance by focusing on core clients and the most promising opportunities. Business, he said, is being managed carefully and key wins during the quarter indicate the company is poised for recovery.

Bergstein also noted the company would hold its first North American "all hands meeting" in two years. Simultaneous strategic meetings would also be held in Europe and Latin America offices, he said.

"We believe these meetings mark a turning point for our people and will help move our company forward," said Bergstein.

DiamondCluster's top five clients accounted for 28 percent of revenue during the third quarter, compared with 40 percent of total revenue for the same quarter one year ago. North American clients accounted for a little more than half of its third-quarter revenue.

Restructuring efforts have included layoffs of consulting professionals, Bergstein told analysts. As of Dec. 31, 2002, DiamondCluster had 613 consulting professionals, compared with 958 during the same quarter in 2002.

Bergstein told analysts he expects results to remain flat for its March quarter.

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