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Scient restructures operations to better align with market demand; revises March quarter expectations
Investor conference call scheduled for today to review outlook
San Francisco (ots-PRNewswire) - Scient (Nasdaq: SCNT), the eBusiness Systems Innovator(TM), is lowering its revenue and earnings expectations for its fourth fiscal quarter ending March 31, 2001, and announced plans to eliminate 675 positions in the June quarter. In addition, Scient announced that, depending on the impact of near-term business conditions, it may eliminate approximately 175 additional positions over the next several months.
Scient will be holding a conference call to review fiscal fourth quarter expectations at 4:30 p.m. EDT/ 1:30 p.m. PDT today, April 11, 2001. To participate in the conference call within the U.S., please dial 800-289-0518 approximately ten minutes prior to the call. International callers should dial 913-981-5532. The passcode for the call is 543469. The call is also available through webcast at http://www.scient.com
Commenting on the market, Bob Howe, Chairman and CEO of Scient, stated, "The economic environment remains extremely challenging. Our large enterprise clients continue to delay IT spending initiatives which has resulted in further deterioration in our pipeline. At this juncture, we believe the weakness in IT spending trends may extend well beyond the next quarter or two, further limiting our visibility, and we may experience negative revenue growth in the next several quarters if such trends continue. As a result, we have made a very difficult, yet necessary, decision to take workforce reductions and downsize our geographic footprint to further align our cost structure with market demand."
Mr. Howe also stated, "We are striving to reinvent our business by evolving our service offering for enterprise clients and have had early success in selling our high value, high impact offerings. We also have developed a more cost-effective integrated approach through our Engineering Acceleration Centre which enables us to be more competitive on pricing. These offerings combined with our action to better align our capacity with the current demand outlook should provide us greater flexibility in our reinvention process."
Scient's revenues for the March quarter are now estimated to be approximately $27 million. Professional services costs are projected to total approximately $26 million. As a result of this revised outlook, Scient is projecting a pro-forma operating loss of approximately $32 million and a pro-forma loss of approximately $0.39 per share (not tax-affected). The company estimates that its cash position at the end of the March quarter was approximately $160 million.
Scient expects to record a total restructuring charge of approximately $95 million to $110 million. An estimated $60 million to $65 million of the total should be recorded in the March quarter to cover surplus real estate and other IT-related assets. The restructuring charge estimated for the June quarter is $35 million to $45 million to cover severance, and office related closing costs. The cash portion of the restructuring charge is expected to be $58 million to $68 million. As a result of this restructuring, Scient expects to achieve annual cost savings of approximately $175 million. In order to more closely align to market demand, Scient expects to significantly downsize and modify its geographic footprint and move its corporate headquarters to New York from San Francisco. Included in this plan, Scient will be closing its Los Angeles and New Jersey offices and reducing its San Francisco, Boston, and Chicago locations to smaller sales offices. Scient will be reviewing several other offices to determine appropriate actions, including possible closing or downsizing as market conditions warrant.
Bill Kurtz, executive vice president and CFO noted, "Our balance sheet remains strong as we estimate that our cash balance was approximately $160 million at the end of March. Post restructuring, we believe our cash balance will approximate $100 million at the end of June. We believe that the restructuring actions we are taking should significantly reduce our fixed costs and accelerate our return to profitability." Given the current market conditions and lack of visibility, Scient does not plan to provide guidance on its near term financial outlook.
A replay of the April 11th call will be available through April 18, 2001. Access to the replay is as follows:
United States: +1 888-203-1112; Passcode: 543463
Outside United States: +1 719-457-0820; Passcode: 543463
About Scient(R): Innovate -- For What's Next(TM)
Led by veterans with experience in both eBusiness and key vertical industries, Scient uses eBusiness as a catalyst to help clients unlock the value in their enterprises. Scient's process leverages expertise in technology, strategy, and customer experience to help clients create new sources of revenue and eliminate cost. In addition, Scient works with clients to increase their organisation's abilities to anticipate and capitalise on changes in their business environment. Scient can be reached at http:// www.scient.com or +1 415-498-3100.
Special note regarding forward-looking statements
Some of the statements in this press release constitute forward-looking statements. These statements involve known and unknown risks, uncertainties and other factors that may cause our or our industry's actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. Forward-looking statements relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as "may," "will," "should," "expects," "plans," "anticipates," "believes," "estimates," "predicts," "potential" or "continue" or the negative of such terms or other comparable terminology. These statements include but are not limited to statements regarding the scope and nature of Scient's expected restructuring activities and the anticipated impact of those activities, the nature and size of the market for our services and the corresponding client demand, and our expectations regarding the future success of the business, future revenues, losses, profitability, cash position, restructuring charges, and other operating and financial results. These statements are only projections. Actual events or results may differ materially. Factors that could cause or contribute to such differences include but are not limited to, the timing and size of client demand for Scient's services; the potential loss of or delay by major clients; Scient's ability to develop successful relationships with partners and other third parties; the size and development of the global market for our services; our ability to accurately price our projects and to meet client expectations; our ability to manage and expand international operations; our ability to predict and offer responsive services to meet market demand; the highly competitive market in which we operate; our ability to obtain new clients and to retain existing clients over the long-term; the efficiency and success of our accounts receivable efforts; the accuracy of our internal reporting and management systems; our ability to attract, train and retain qualified personnel; our reliance on a limited number of clients and our lack of long-term contracts; and the development and sustainability of a market for Scient's services. This list should not be considered inclusive of all risk factors. In evaluating these statements, you should specifically consider various factors, including the risks factors listed in our Form 10-Q for the period ended December 31, 2000 filed with the Securities and Exchange Commission. These factors may cause our actual results to differ materially from any forward-looking statement.
ots Originaltext: Scient