Quintus, battling financial troubles and class action lawsuits following an inflated earnings announcement in October, has hired Price Waterhouse veteran James Coriston to the daunting position of interim chief financial officer. Quintus, best known for its eCRM solutions, has seen its stock price plummet and litigants line up after announcing on November 15 that three documents reporting $13.5 million in second quarter revenue were falsified. Plaintiffs have filed at least a dozen class action suits in New York, Florida, California, Washington D.C. and other states. CEO Alan Anderson was terminated for cause and replaced by acting CEO Paul Bartlett, formerly Quintus' chief operating officer. Even after including the falsely inflated revenues, Quintus stated a net loss of $20.5 million for the quarter. Although an extensive internal audit is being conducted by PricewaterhouseCoopers, Quintus, which has 900-plus customers including United Airlines and John Deere, still has yet to file its 10-Q quarterly earnings form with the U.S. Securities and Exchange Commission (SEC) and Nasdaq. On November 27, Nasdaq blocked trading on Quintus stock (QNTSE) until the report could be submitted, but not before its shares dropped 50 percent to below $3, down from over $59 in February. In addition to PricewaterhouseCoopers' audit, the company's financials are currently under review by Deloitte & Touche. In early January, Quintus said in a statement that it expects the audits to be completed "by the end of January," at which time the company hoped to disclose its restated earnings. The company would not discuss the matter further while the investigations are under way.
Coriston's immediate tasks will involve assessing the damage done and overseeing the company on its road to financial recovery. A former vice chairman of PricewaterhouseCoopers and a Price Waterhouse partner for 25 years, he will oversee the completion of the audits and the review by Nasdaq, as well as the filing of the long-overdue SEC documents and earnings reports. "We are diligently working on the various financial issues before us, and we are spending the appropriate amount of time on each to assure accurate, quality results," Coriston said in a statement. Rod Johnson, service director at e-business strategy firm AMR Research in Boston, said choosing an experienced outsider like Coriston as interim CFO was an intelligent strategic move by Quintus. "They are bringing in a proven expert to clean up their image," he added. Even before hiring Coriston as a cleanup man, Quintus had already begun major efforts to salvage its financial holdings and public image. In mid-December, Quintus announced a major restructuring plan that it projected would cut annual costs by $8.3 million. The company laid off approximately 400 employees on December 13, decreasing its workforce by nearly 25 percent, and moved its headquarters from Fremont, Calif., to nearby Dublin. Direct sales and marketing staffs suffered most in the layoffs, and the company announced in its December 13 statement that it is scaling back its sales initiatives toward emerging markets and hosting/ASP initiatives. Whether or not Coriston and company will be able to recharge Quintus remains in question. According to Johnson, the company will need a near miracle to renew investor confidence once it returns to the Nasdaq floor. "In software companies, the market is all about momentum, and [Quintus is] in a spot right now where they have no momentum," he says. "Very few, if any, companies have come from a situation with such significant speculation and been able to turn the company around." Johnson suggests that an acquisition may be Quintus' saving once it has redeemed itself financially. "[Quintus is] in a tough spot between the leading CRM vendors and the leading communication infrastructure players that are approaching the space they used to call home," he explained. "There's lots of interesting technology and domain expertise that has value to lots of companies, so I think you could see them as a pretty interesting acquisition."