Inforte Breaks Even In 4Q; Moves Forward With Caution

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Inforte, an e-services company based here, broke even for its fourth-quarter 2001 and offered a cautious view toward the next couple of quarters.

Phil Bligh, Inforte CEO, told analysts during a conference call Friday morning that he is pleased the company generated cash but was disappointed by revenue levels.

While there are signs of improvement in the macroeconomic environment, Bligh told investors the short term remains uncertain.

"We tend to operate and forecast based on our own data, and we haven't seen a sign of recovery in our own data yet," said Bligh. "Perhaps Q2 [will represent a bottom, but we have no way to know for sure."

Bligh said the company plans to reduce its workforce by about 40 employees, bringing the total head count to about 250, during the March quarter to "keep costs in aligned with client demand."

For the quarter ended Dec. 31, Inforte reported a loss, before charges, of $632,212, or 0 cents per share, on sales of $10.5 million. That compares with income, before charges, of $2 million, or 15 cents per share, on sales of $17.4 million for the same quarter last year.

The results, before charges, met First Call analysts' expectations.

When taking into account a one-time, non-cash stock compensation charge of $1.4 million, however, the pretax loss for the quarter was $1.4 million, or 12 cents per share.

During the quarter, Inforte repurchased 137,000 shares of stock at an average price of $9.72 per share. The board approved a $25 million stock repurchase program on Jan. 24, 2001, and as of Dec. 31, $10.5 million remained authorized for repurchase. Also as of Dec. 31, Inforte has $75.1 million in cash and marketable securities.

Bligh described the market environment as highly competitive and said pricing is still tough. The company is seeing some stabilization, said Bligh, but the market is still constrained by excess capacity, particularly in the United States.

Inforte competes mostly with the Big Five consulting firms, he said, adding IBM, in particular, has made some notably aggressive pricing moves.

"We've seen some fairly dramatic price moves from IBM and a lot of smaller companies that we don't tend to compete with as much," Bligh told analysts.

Bligh expressed optimism regarding revenue opportunities following operational changes during the past several months. He highlighted the company's decision to focus on demand chain management, which he described as "the concept that joins together CRM, supply chain management and ERP in a coherent fashion."

"[Demand chain management is an operational strategy we believe is the future of how companies should be run, with highly optimized, demand-driven value chains," said Bligh. "And it's something that's gaining a lot of traction with analysts."

Looking forward, Nick Padgett, Inforte's CFO, told analysts the company estimates revenue, excluding expense reimbursements, of $8.5 million, and cash earnings per share of 0 cents per share for each of the next four quarters. The estimates include expenses for the anticipated employee layoff during the March quarter.

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