Teleservices provider Sitel Corp., Omaha, NE, eliminated 350 middle management jobs last month in the hopes that trimming some fat off its midsection will lead to an increase in fourth quarter results. The announcement comes after the company released its third quarter results with earnings per share flat at 1 cent and revenues showing a 22 percent increase to $146.8 million and net income showing an increase of 8 percent to $787,000.
Analysts said the move to eliminate the positions was something the company had to do. Expected client business did not materialize in the third quarter, said analysts, and European operations continue to “drag earnings.” Estimates for earnings per share have been reduced to seven cents, down from 14 cents. Analysts have also reduced earnings per share for 1999 to 25 cents, down from 37 cents.
“We believe the hard measures management is taking should bear fruit within the next 12 to 18 months and provide catalysts for stock appreciation,” said Vivian Kuan, an analyst for J.P. Morgan Securities Inc.
The move, said the company, will bring corporate executives closer to the decision making level. “We eliminated a layer of our structure which elevates the business units and they report to the top rung of corporate management, where decisions are being made,” said Scott Rude, spokesman for the company's human resources department. “We've got a much cleaner operation in that sense, and a cleaner direction overall.”
Rude said the company would save $10 million annually with the reduction in management levels. In connection to the 350 positions eliminated in North America, Europe and Latin America, the company's management organizations in North America and Europe were closed. It consolidated 12 businesses in the U.S. into four industry-focused units. As a result, 14 business units report directly to a four person executive committee led by president/CEO Phil Clough. The company does not expect to report additional 1998 restructuring charges related to these recent changes.
“We eliminated redundancies and put our senior managerial levels at the corporate level to streamline the corporate process,” said Jim Jacobson, director of investor relations. “All of this should lead to better results [fourth quarter]. We have taken a very aggressive growth plan and implemented it; now the acquisition phase is behind us,” he said.
“Management is taking a highly conservative stance going forward,” Kuan said. “[They are] committing to sequential improvement.”
