Decreased Y2K Spending Takes Bite Out Of Keane 4Q Sales, Profitsgreenspun.com : LUSENET : TimeBomb 2000 (Y2000) : One Thread
Faced with receding demand for year 2000 services, Keane Inc. today reported revenue of $220 million for the fourth quarter of 1999, down 25% from $293.8 million for the year-ago quarter. Revenue from Keane's core plan, build, and manage services for the period ended Dec. 31 were $196 million, excluding Y2K business, down 1% from the prior year. Pro forma net income for the quarter was $5 million and 7 cents per diluted share, compared with net income of $23.6 million and 33 cents per diluted share the previous year.
Overall revenue for 1999 was $1.04 billion, down 3% from $1.08 billion for fiscal year 1998. Keane's core revenue, excluding Y2K services, was $835 million, up 18% from 1998. Prior to a one-time $13.7 million charge related to employee severance costs, the consolidation of less-profitable business units, and the closing of certain facilities, net income for 1999 was $81.2 million. After the one-time charge, net income was $73.1 million; net income was $96.4 million in 1998. Prior to the one-time charge, diluted earnings per share were $1.12. After the one-time charge, diluted earnings per share were $1.01. This compares with earnings per share of $1.33 in 1998.
Keane is looking to rebound from the sharp decline in Y2K-related revenue by moving toward Internet-based customer-relationship management, data warehousing, custom application development, and application management.
The winding down of Y2K-related business marks "the end of a very dramatic transition for Keane," says CEO Brian Keane. But with revenue from the company's Web-related business growing to $118 million in the fourth quarter, from nothing a year ago, Keane says his company can break from its image as a Y2K services company and find success in the Internet services market.
Helping Keane's cause is its $142 million in cash, combined with its lack of a debt, says Steve Ashley, a senior VP with Robert W. Baird, an investment bank. "Keane saw its business runoff sequentially for the past 18 months due to the technology spending lockdown and decreasing Y2K business. These two factors combined were a huge psychological impediment on the Wall Street community toward the Keane name." With a sufficient amount of cash and no debt to weigh the company down, Ashley says he expects Keane will be able to re-invent itself to focus on providing services over the Web.
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