These steps include reducing headcount and balancing its mix of skills, closing its Sydney office and reducing rent costs. The company also lowered its first quarter revenues and earnings outlook.
Sapient is reducing its total workforce by 720 people, or roughly 20%. The workforce reduction affects operations in the United States and Sydney only. While retaining all of its existing skill-sets and capabilities, Sapient changed its skill-set mix with this reduction to place more emphasis on the skills clients are demanding. Sapient is closing its 70-person Sydney office, and will be consolidating office space in some cities where it has multiple office locations. In Europe, where the economic environment is markedly different, Sapient continues to see revenue growth and is expanding its operations.
The economic environment in North America has become much tougher than we expected, said Jerry A. Greenberg, Sapient’s co-chairman and co-chief executive officer. This has resulted in our making difficult, but needed, decisions about our people and costs, particularly in the United States. We believe these actions will allow Sapient to continue to be a leader in providing clients with the critical business and technology initiatives that drive their competitive advantage.
Sapient will take a restructuring charge in the first quarter of 2001 of approximately $35-40 million, which will consist of severance and related expenses from the reduction in workforce, and other charges related to the Sydney office closing and office space consolidation elsewhere. The company expects cost savings from these actions of approximately $5 million in the first quarter, and $60-65 million on an annualized basis.
Given the impact of the uncertain economic outlook, the company now expects its first quarter 2001 revenues to be approximately 20 percent lower than the analyst consensus estimate of $136 million, with pro forma earnings per diluted share (which exclude amortization of intangibles, acquisition costs, stock-based compensation charges, and restructuring costs) estimated at a loss of $0.03 to $0.05 per share. The company anticipates that its cash position at the end of the first quarter will be approximately $250 million. Given the uncertainties of the marketplace, the company did not give any further guidance for the full year 2001.
