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Ciber Cutting Staff, Will Propose Divesting Some Business After Sales Plummet

Michael Novinson
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Ciber is slashing more jobs and will recommend to its board that the solution provider divest its non-strategic operations as its stock price plunged to a 22-year low.

The Greenwood Village, Colo.-based company - No. 37 on CRN's Solution Provider 500 list - saw sales fall 11 percent to $175.1 million for the quarter that ended March 31, after the company factored out changes in foreign currency exchange rates. The sales figure was more than 10 percent below Seeking Alpha estimates of $196.5 million.

Ciber also delivered an adjusted net loss of $10.1 million, or 13 cents per share, down from an adjusted net income of $4.1 million last year. Seeking Alpha has projected net income of 1 cent per share.

[RELATED: Offshoring, Cross-Selling Help Ciber Notch Most Profitable Quarter Since 2010]

’It takes a considerable amount of time to jumpstart revenue after years of neglect,’ Christian Metzger, Ciber’s chief financial officer, said during the company’s earnings call Thursday.

Wall Street reacted very unfavorably to the results, sending Ciber’s stock free-falling 25.6 percent Thursday morning to $1.60 per share, its closing price for the session. That's the lowest price at which Ciber stock has traded since the company went public in March 1994.

Ciber initiated another round of headcount reductions at the end of the first quarter, Metzger said, as the company expects by the end of this year to exceed its goal of taking out $5 million in sales, general and administrative (SG&A) costs. The job cuts are focused mostly on workers in general and administrative functions, although a company spokeswoman declined to disclose the number of layoffs.

’We are accelerating other aggressive actions to match our overhead structure to lower revenue,’ said Metzger.

CEO Michael Boustridge initiated a $27 million restructuring soon after taking the top job in June 2014. The plan included 280 layoffs and was focused around reengineering a go-to-market strategy around high-value core offerings.

Boustridge also conducted a top-to-bottom review of Ciber’s business and is ready to recommend to the board at its meeting later this month that the company divest from non-strategic operations. That process has already begun, as Ciber is planning to sell its Australian business - which has annual sales approaching $10 million, but is losing money - to local management.

On the earnings call, Boustridge was very critical of decisions made under prior management to eliminate the recruiting arm of its talent services organization over a period of several years as part of a broader cost-cutting initiative. Boustridge said the cuts put the company’s talent services organization -- which helps augment IT talent in customer organizations -- in a precarious position for the long run since Ciber was not building a pipeline of prospective customers at the time the decisions were made.

’You need recruiters to grow your talent services,’ Boustridge said.

Boustridge began to reinvest in talent services in the second and third quarters of 2015 to refill the positions that had been taken out of the company. While Ciber is starting to see positive trends from its new first responders, Boustridge cautioned that it will take at least two to three quarters to recover from years of under-investment and reestablish staffing relationships.

Ciber also began working in early 2015 to better align its global compensation payout system to company performance. Although Boustridge said the realignment was necessary and should improve the quality of service to customers, he said it has resulted in many billable consultants in such markets as The Netherlands opting to leave the company.

Sales in Ciber’s North American business fell 6 percent year over year to $99.6 million due to pricing pressure from vendors and tightening client budgets that led to temporary project suspensions.

’Out of the gate in the first quarter, companies tightened their budgets or prolonged their budget cycles, so we were not in a position to close deals as quickly,’ Metzger said.

Ciber’s international revenues fared even worse, dropping 16 percent to $76 million due to softness in the United Kingdom and massive turnover in the company’s talent services business.

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