Nine Fayetteville Jobs Chopped by Acxiom

Despite preventative pay and cost cuts, the axe at Acxiom Corp. had to fall again.

On May 16, while confirming Acxiom Corp.’s earlier lackluster revenue predictions for fourth-quarter fiscal 2001, company Operations Leader Rodger S. Kline asserted that “the only way we would have layoffs is if we had a substantial downturn in the economy in areas and ways that are unexpected at this time … Our expense management has been extremely effective.”

Two weeks ago, though, the Little Rock information technology company announced that 412 of its 5,845 employees were being laid off.

And during the same May 16 teleconference, Chief Executive Officer Charles Morgan blamed the firm’s fourth-quarter underperformance in part on one-time charges stemming from unfulfilled contracts, like the $34.6 million loss resulting from former client Montgomery Ward’s bankruptcy. One-time charges, Morgan said, shouldn’t affect the ensuing quarter’s figures “unless we’re really stupid.”

But one-time charges cropped up again. This time, they stemmed from the retirement of outmoded mainframe computers and other aging equipment. According to the company’s annual 10-K report, released last week, the value of computer, communications and other equipment rose 23 percent, to $186 million from $151.8 million, for fiscal 2001.

Nine of 43 positions at the company’s Fayetteville software development lab were cut. Despite the fact that’s 21 percent of the personnel in Acxiom’s Northwest Arkansas division, compared to 7 percent for the companywide reductions, Fayetteville business unit leader David Roland was upbeat.

“I think we’ll do fine,” Roland said of his division.

About 70 jobs in Little Rock and 170 in Conway were phased out.

The company’s fortunes began heading south on March 30, when the company issued a revenue and earnings warning that forecast fourth-quarter revenue of $205 million, with an operating loss of $3 million-$6 million and a per-share loss of 6 cents-9 cents. That was about 70 percent below what analysts had projected.

National Downturn Blamed

Company leaders blamed the unfavorable figures on the national economy. A number of lucrative contracts for Acxiom’s flagship product, the AbiliTec data integration software, were stalled because potential clients had decided to hold off until their own financial prospects seemed clearer. (AbiliTec also failed to rescue the firm’s foreign figures.)

The company’s British operation, Acxiom Ltd., posted losses of $500,000 for fiscal 2001, compared to profits of $5.1 million the previous year and $1.9 million for fiscal 1999. The company’s annual report attributed the dropoff mainly to “investments to build the European AbiliTec software product,” and noted that the company has no significant revenue or operations elsewhere overseas, despite maintaining offices in Spain, France and Japan and being involved in a joint venture in Australia.

The following week, company leaders announced 5 percent pay cuts for most employees, with voluntary reductions of up to 20 percent suggested — an option that Morgan himself took, according to the firm’s proxy statement. Advertising, marketing, incentives, travel and other expenses were scaled back as well.

Officials expected the cutbacks to save $17 million to $20 million beginning in the second quarter, especially when 38 percent signed up for the higher cuts in exchange for increased stock options.

But those savings predictions will go untested. Faced with a second straight failure to meet earnings expectations — first-quarter 2002 projections were virtually identical to those for fourth-quarter 2001 — Acxiom chose to immediately guarantee the $17 million-$20 million reductions figure through layoffs.

The move marked a sharp reversal of course. For fiscal 2001, excluding severance pay and other considerations stemming from layoffs of 250 employees in August 1999, salaries and benefits had risen by 18 percent to $363.5 million. In addition, advertising expenses had risen by 66 percent, travel and entertainment by 25 percent and consulting and outside services by 35 percent.

In the meantime, the company is reconsidering plans for a customer service and data center facility in Phoenix — a project that the company’s 10-K report priced at $25 million and said should be completed by September 2002. Spokeswoman Allison Melson said last week that “right now we’re just looking at our options — whether we should proceed or put this on hold.”

Downtown Office to Proceed

Work will proceed, though, on the $30 million-$35 million,12-story, 171,000-SF office building for which ground was broken Oct. 30 in Little Rock’s River Market District. Some 700 employees are to work there, with an expected opening date of early 2003.

Analysts initially responded unfavorably to the company’s fourth-quarter numbers. The March 30 warning, issued after the close of trading on a Friday, spurred six firms the following week to reduce their ratings for Acxiom stock. Their ranks included hometown Stephens Inc., which scaled back its recommendation from “buy” to “neutral.”

Not that stock analysts are particularly prone to forgive or forget, but no such reaction ensued after last Monday’s warning and layoffs announcement. Analysts are still waiting to see the consequences of the company’s strategy during the economic slowdown it still blames for its troubles. Only one, First Analysis Corp. of Chicago, downgraded Acxiom’s stock rating, from “strong buy” to “accumulate” — even then, somewhat less than a vote of no-confidence.

Stephens is sticking by the “outperform” ranking it assigned the stock in mid-May, itself an upgrade from the previous month’s “neutral.” The only other altered recommendation since early April came from Merrill Lynch, which stepped up its rating of Acxiom stock from int.term neutral to int.term accumulate.

Last week Jim Pickens, head of the Arkansas Department of Economic Development, summed up what appears to be the prevailing attitude toward the company’s travails: “Business is cyclical. There are peaks and valleys, there are ups and downs, and even though I’m sure this is a painful process for Acxiom to go through … I predict that in the long term they will come through this stronger than ever.”

That should start happening, Pickens said, “once we determine that we’re not quite as ill as we think we are.”

“I think this is a temporary malady that they’re going through out there,” he said. “They’ve found their niche, and they do it very, very well.”

Decline in Stock Value

Even so, Acxiom’s stock price had been declining steadily in value. On Nov. 14, at the close of trading it stood at $43.87. That turned out to be a high-water mark, as the price dropped below $40 on Nov. 16. On Feb. 20, it fell short of $30.

Six weeks later, the bottom dropped out, with the March 30 earnings warning leading to a closing price of $11.50 on the next day of trading, April 2. Since then, the stock had struggled as high as $19.87 on May 21 — the highest closing price since the $20.87 recorded shortly before the March 30 warning.

Moving expectations for improvement back a quarter, the company projects revenue of $215 million to $220 million and earnings of 5-10 cents a share for the second quarter of fiscal 2002, which ends Sept. 30.

Even without “significant improvements in general economic conditions,” a company statement said, fiscal 2002 revenues should total $880 million to $900 million. For fiscal 2001, that figure exceeded $1 billion for the first time in Acxiom history.