Founder of Sitel takes reins again

2 top officers resign as teleservices firm moves to cut costs

March 31, 2001|By Dan Thanh Dang | Dan Thanh Dang,SUN STAFF

The chairman and founder of Sitel Corp., who has stepped back into command at the Baltimore-based provider of Internet and telephone customer service support, said yesterday that management changes and a new tax structure to reduce expenses will help return the company to past levels of growth.

Sitel's board of directors appointed James Lynch chief executive officer after the resignations of CEO Phillip A. Clough and Chief Financial Officer W. Gar Richlin, who were hired in 1997 to help guide the burgeoning growth at the teleservices company. Their resignations are effective tomorrow.

Despite steadily increasing revenue, Sitel's bottom line had turned negative over the last couple of years because of the closing of poorly performing call centers, layoffs and restructuring. Company officials said during an analysts conference yesterday that first-quarter revenue for this year will be between $180 million and $185 million, about 5 percent below its earlier outlook.

But officials said that earnings for the first quarter still will be between 5 cents and 6 cents per share, mostly because of a deferred $9.8 million tax benefit resulting from the company's recent move to reclassify its operations in the United Kingdom as branches of the U.S. company. The reclassification will significantly reduce Sitel's tax rate over the next three years and add to the company's cash flow, company officials said.

"I'm excited about where the company is and its position for the future," Lynch said. "Overall, we remain upbeat about our prospects and intend to remain aggressive in this environment to attract new business and new management talent to our company."

As part of the leadership changes, Sitel's senior vice president of finance, James Stevenson, has been named CFO, and Bill Fairfield, a director of the company, has been asked to join the office of the chairman.

Lynch started the company in 1985 in Omaha, Neb. In the mid-1990s, the young company was generating $100 million in business. By 1999, Sitel was generating almost $600 million in business with reputable clients like General Motors Corp., Hewlett-Packard Co. and IBM Corp.

Analysts said Sitel lost its way by acquiring too many companies and piling up too much debt.

Yesterday, Lynch praised the work of Clough and Richlin, who helped streamline operations and eliminate hundreds of positions to help the company regain its footing. But analysts said the men failed to improve earnings and revenue growth at a rate that satisfied the board and shareholders.

"The future is starting to look better, but it's going to take longer than the company had hoped," said Ryan Sailer, a research analyst who follows Sitel for the investment management firm Kirkpatrick Pettis. "I think things were starting to turn around, but it hasn't happened as fast as shareholders and others would have liked.

"Here in the first quarter, we were hoping things would turn around, but that doesn't appear to have happened. They're going to hit their earnings expectation, but it's a still a disappointment because they're not getting it from operations. They're getting it from the tax benefit. It's not how you want to hit your earnings numbers."

Sitel stock dropped a penny on the New York Stock Exchange to close yesterday at $2.80.

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