This Feature |
|
Related Items |
|
Friday, September 19, 1997
ATC Communications
<% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ATCT)") else Response.Write("(Nasdaq: ATCT)") end if %>
Phone: 214-361-9870
Price (9/18/97): $4 13/16
HOW DID IT FIND TROUBLE?
No doubt about it. Ever since the
Fool Portfolio acquired
a small stake in ATC COMMUNICATIONS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ATCT)") else Response.Write("(Nasdaq: ATCT)") end if %> back in October
for just under $23 a share, the stock has been quite the dog. Slowing revenue
growth and a revolving door of executives has led to a revolving door of
investors.
The company shocked the investment community back in February with an unexpected
earnings shortfall. When earnings are going to fall 60% shy of estimates,
most companies pre-announce the downfall or give analysts downward guidance.
ATC did neither. One would think they could have picked up the phone and
called. After all, that is their business.
BUSINESS DESCRIPTION
ATC Communications provides outsourced telecommunications-based marketing
and information services to major corporations in the U.S. The Dallas-based
company designs, manages, and conducts programs such as customized, large-volume
call processing services featuring live operators who interact with a client's
customers and prospects. It also manages call center facilities for clients
under multiyear contracts.
FINANCIAL FACTS
Income Statement
12-month sales: $106.3 million
12-month income: $6.2 million
12-month EPS: $0.26
Profit Margin: 5.8%
Market Cap: $105.3 million
Balance Sheet
Cash: $0.6 million
Current Assets: $23.8 million
Current Liabilities: $9.9 million
Long-term Debt: $5.1 million
Ratios
Price-to-earnings: 18.5
Price-to-sales: 0.99
HOW COULD YOU HAVE SEEN IT COMING?
At the time the FoolPort
bought
in, outsourced telemarketing was a hot niche. Competitors like APAC
TELESERVICES <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: APAC)") else Response.Write("(Nasdaq: APAC)") end if %>, SITEL <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: SWW)") else Response.Write("(NYSE: SWW)") end if %> and SYKES
<% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SYKE)") else Response.Write("(Nasdaq: SYKE)") end if %> had all more than doubled over the last year. Large corporations
were beginning to diversify their offerings and hiring a company to handle
the dirty work of contacting potential customers or providing telephone support
made sense.
No player was growing as fast as the smaller ATC, whose shares had grown
fivefold by that time. But the company had the foot pressed hard on the
accelerator and the engine was certain to give out. As ATC began busting
at the seams, the company soon found itself with a new chief executive officer
in November and a new chief operating officer this March.
The changes at the top gave some of ATC's larger clients cause for concern.
AT&T was already concerned that it made up almost half of the company's
revenue base. While the company assured AT&T that it would diversify
through acquisitions, making the telco giant a smaller part of the revenue
mix, AT&T came up with a different way to accomplish the same thing.
Revenue from AT&T this year is off 10%.
In addition, the company lost its GTE business, which was not a major client
to begin with, when the communications heavy decided to do its own telemarketing.
While ATC has kept most of its accounts, like Pacific Bell and American Express,
the explosive growth many expected from of the sector failed to materialize.
Shares of APAC have been hit just as hard.
WHERE TO FROM HERE?
ATC is confident it can once again grow at an acceptable pace. Not only is
the relationship with American Express booming, but the company is considering
other ways to grow its revenue base. The company is also looking at ways
to trim costs. By outsourcing short-term contracts and maintaining a cautious
hand with selling, general, and administrative (SG&A) expenses, the company
is hoping to grow sales and margins.
Recognizing its shattered share price, the company is also working on a share
repurchase plan and will not hesitate to incur debt in the process. Then
again, the company is no stranger to leveraging its interest in the company.
Recently the Chairman had to sell some of his shares when he received a margin
call from his personal broker.
While ironic to find a company borrowing money to buy back shares at the
same time that its board chief is paying the price for doing the same thing,
it at least lets the investment community know that ATC's management feels
the stock is undervalued.
-Rick Aristotle Munarriz
([email protected])
Check out the Daily Double Message Board!
WE DELIVER
Get The Daily Trouble delivered
straight to your e-mailbox every evening!
|
