Embattled i-shop marchFIRST Tuesday said that it plans to revamp its business strategy, after lowering earnings expectations for next quarter. The firm also said results for 2001 would fall well below earlier expectations.
The company said it expects to post a quarterly loss of $0.25 to $0.30 per share. The Street had expected the company to post a profit of $0.07 per share.
For 2001, marchFIRST forecasted per-share earnings of $0.25 to $0.35; analysts’ had expected earnings of $0.50 per share.
Shares of marchFIRST closed at $1.06 in heavy trading on Tuesday, down 40 percent from its previous close and 99 percent off its 52-week high of $81.13. During trading, marchFIRST dipped to $1.00, an all-time low for the stock. The company was also delisted from the S&P MidCap 400 following the day’s trading.
The downward decline in marchFIRST’s stock price has been fueled in part by the April market correction, flagging income from dot-coms, and seasonal spending trends — all of which have affected the company’s revenues and earnings estimates. In addition, election uncertainty and news that durable-goods orders fell sent the NASDAQ to its lowest close in over a year Tuesday.
Tuesday’s low price means it will be difficult for marchFIRST to raise cash through the sale of equity — and cash is what it desperately needs: the company said in its quarterly regulatory filings with the SEC that it needed at least $50 million in new financing by year’s end to continue.
But execs say they have a turnaround plan, a portion of which went into effect earlier this month when the Chicago-based company said it would cut 1,000 positions, shaving $100 million off annual costs, starting in 2001.
Executives filled in more of the details of its turnaround plan in a conference call with analysts Tuesday afternoon. Chairman and chief executive officer Robert Bernard said the company will refocus on what he said is the company’s high-margin e-services consulting and marketing work, although the firm will continue to perform technology services for its top clients, Bernard said.
marchFIRST’s officers said the company’s service offerings will be scaled back to six: brand and market development; customer acquisition and retention; revenue channel expansion; supply chain integration; intellectual capital optimization; technology optimization and management.
In addition, marchFIRST said that it is evaluating options for selling “non-core assets,” but declined to specify further. Those assets likely include its ASP business, HostOne, and the bulk of its IT infrastructure operations units.
In addition to the earlier staff cuts, marchFIRST will reduce the industries it serves to seven: manufacturing; financial services; high tech and telecom; consumer products/retail; health care; media, entertainment and communications; and transportation/travel and leisure.
This means that the firm would be left with what it said are its 500 highest-margin clients, which account for about 80 percent of the company’s revenue. Work on behalf of the rest of marchFIRST’s client roster, about 1,000 companies, will be terminated.
The company also said it was making moves to centralize its global operations, implement tighter management and financial controls, and to reduce discretionary spending. The firm also said it plans to expand its presence in Asia Pacific and Latin America, which are high-growth markets.
“We continue to win new business and count among our clients a long list of prominent global corporations and some of the most promising emerging enterprises in the world,” Bernard said. “Our recent performance has been disappointing, but we are totally committed to doing the hard work to put this company back on track for long-term growth.”
“The restructuring … signals a renewed commitment to the sound business principles of cost containment and operational efficiency,” he added.
Executives also reiterated that the company is “actively engaged” in discussions with “a number of sources” regarding ways to meet its need for additional funding, such as extended credit, cashing out of long-term investments, or through accounts receivable financing. The company has about $400 million in receivables, it said.
The firm also said it was considering sales of debt or equity, although at Tuesday’s closing price, it’s not certain how viable an equity sale would be alone.
During the analyst call Tuesday evening, Bernard said that the company is planning on landing funding “very soon.”
Following the changes, marchFIRST executives said they expect quarterly revenue to increase 6 to 10 percent each quarter going forward, and annual sales of $1.2 billion to $1.3 billion.
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