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Conduent Mulls Sale, Further Divestiture To Reverse Fortunes

‘All opportunities are under review, both selling pieces as well as the whole company, but there’s lots of work to be done before we can give any updates in that category,’ Conduent’s interim CEO, Cliff Skelton, tells Wall Street analysts.

In reporting disappointing second-quarter earnings, Conduent’s interim CEO, Cliff Skelton, said the company is at a crossroads and in the midst of a strategic review in which all options are on the table to turn around the business, including a possible sale.

The Xerox spinoff completed $1 billion in divestitures last year to streamline operations in its core business functions, but it has yet to transform those savings into better earnings for investors. When asked by an analyst if another round of divestures or a possible sale could be part of the “strategic review,” Skelton said there isn’t an “exact plan” at this point.

“We’ve just started the examination with our board. So we don’t have an exact plan. All opportunities are under review, both selling pieces as well as the whole company, but there’s lots of work to be done before we can give any updates in that category,” he said.

Skelton has been with Conduent for seven weeks since being named COO. Last week, prior to the company’s Thursday earnings call, Skelton was named interim CEO, and the board said it would stop looking for a permanent replacement until further notice.

For the second quarter of 2019, the Florham Park, N.J.-bsaed company reported revenue of $1.11 billion, down 19 percent from last year, when it reported $1.38 billion. Renewals fell nearly $1 billion in year-over-year comparisons, down to $485 million this quarter.

Despite the lackluster earnings, Skelton said he believes the “bones” of the business are good and can be turned around.

“We've got a lot of great foundational attributes here,” he said. “We've got great people. We've got a great client base. From my point of view, we've got what we call ‘good bones’ in our company but we've missed a couple of steps on process and the right people on the right jobs, and so that's going to be a high-priority effort right away.”

Skelton said the company needs more salespeople and more sales leaders. The sales staff shrunk from 290 salespeople to about 240 over the past year.

“Our view is continued investment in the sales force, not just from a numbers perspective but from a quality and a sales leadership perspective,” he said. “So, as I said, we're down about 50 [salespeople], but we see that ramping back up and pretty quickly.”

Conduent’s previous CEO, Ashok Vemuri, left Aug. 6 after saying in May that he was resigning. That came a month after the Conduent board of directors accused activist investor Carl Icahn of staging a board takeover attempt.

In April, Michael Nevin, one of Icahn’s handpicked board members, resigned via a four-page letter that outlined ways Conduent's board and management had failed the company. The letter was filed publicly with the U.S. Securities and Exchange Commission.

In a rebuttal, Conduent countered that Icahn had offered to keep his board member’s letter private if Conduent’s chairman of the board, William Parrett, stepped down. Nevin, a portfolio manager with Icahn Enterprises, disputed that and said Icahn never delivered an ultimatum but rather stated his displeasure with Parrett and CEO Vemuri.

Nevin said Icahn held those two men responsible for the company's 40 percent loss of value.

The company has shed more value since that letter. Conduent shares Tuesday closed at $6.60 compared with $19.70 on Aug. 13 a year ago.


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