By Stephen Phillips
US computer services company, Cambridge Technology Partners Inc, was reeling yesterday from the resignation of its third senior executive in as many months, after chief financial officer, Arthur Toscanini, a co-founder of the company quit his post.
Toscanini who presided as CFO over Cambridge’s growth from a start-up eight years ago to a company with more than $600m annual revenue last year, said he was taking his experience and knowledge to an earlier-stage company. He will stay on to head the search for successor, said Cambridge, which is based in the Massachusetts town of the same name.
Toscanini joins a management exodus, which has seen founding chief executive officer, James Sims, resign in July, and the departure of Malcolm Frank, senior vice-president of marketing in early August. Ex-CEO Sims said at the time of his resignation that he was leaving Cambridge to work on more entrepreneurial endeavors. And sources close to the company have said he is involved in a new internet services venture. Frank helped launch e-services start-up NerveWire, last month.
Ex-Cambridge executives now litter the internet services industry, which Cambridge has been struggling to gain a foothold in over the last two years. Former president of north American operations, Bob Gett, who quit two years ago, now runs e-services company, Viant Corp. While former executive vice president, Bill Siebel, who resigned in September 1998, is now CEO of e-services start-up, Zefer. Co-founder and ex-head of north American sales, Gordon Brooks, now heads Breakaway Solutions.
The resignations have taken place against a backdrop of a plummeting stock price and revenue shortfalls for once-fast- growing Cambridge. The company’s stock price stood more than 70% off its mid-1998 high last night at $15.56. Cambridge warned late last month that it expected to record a fourth-quarter loss of at least 29 cents a share – at least 45 cents below Wall Street analysts’ previous consensus estimate of a 16 cents-per-share gain. The company has stumbled over the last eighteen months as it has tried to plug declining earnings from traditional computer services contracts with revenue from online systems integration and internet consulting business.
Meantime, staff churn has not been confined to the company’s executives and Cambridge has flagged crippling turnover across its 4,500 rank-and-file staff as a problem. Investor relations manager, Clare Murphy, told ComputerWire that annual staff turnover after the company’s third quarter to September 30 stood at 29.2%. Research from international human resources research house, the Saratoga Institute, pegged average turnover for the computer software and services industry last year at 23.1%.
Murphy said the company expected to incur additional operating expenses of up to $17m from measures designed to stem further staff defections. The company said recently it would increase employee bonus payments by 50% and offer staff training in popular web site development platforms, Broadvision and Vignette, as well as Microsoft Corp’s MCS Commerce Server software and WinDNA development tools. The latest expenses come on top of a one-time charge of close to $9m, incurred by the company in its first quarter, for earlier bonuses increases and training courses designed to improve staff retention.
Murphy said Cambridge was seeing its shop-floor staff, like their superiors, poached or enticed away by internet-consulting start- ups. She added that the phenomenon was industry-wide, citing the example of Viant Corp, which she said now had a staff churn rate of 28%. Cambridge posted third-quarter revenue of $10.7m, or 18 cents a share, on sales of $168.2m.
