Acxiom's Earnings Will Not Meet Expectations
Acxiom's revenue and earnings for Q1 2006, ending June 30, 2005, will fail to meet expectations, the company announced Tuesday. Acxiom expects revenue of about $310 million, and diluted earnings per share of about 6 cents, which falls short of Thomson Financial's forecast of 16 cents per share. Acxiom, which is a possible takeover target by investment firm ValueAct Capital, also announced that it is cutting costs in the United States and Europe, which will include reducing staff about 4 percent. Published reports say 100 of the jobs will be cut in Arkansas, with another 100 in other U.S. locations, and the remainder internationally. In March 2004 the company cut about 230 jobs, which represented 5.4 percent of its U.S. workforce.
Other plans to slash costs include selling or closing some operations. The company anticipates its expense-reduction plan will trim total expenditures by about $14 million to $16 million a quarter when the effects of the plan are fully realized by the fourth quarter of the fiscal year. Charles Morgan, company leader, noted during a conference call Tuesday that the company's U.S. first-quarter revenues increased 13 percent year over year, 8 percent adjusting for acquisitions, but he admitted "we did fall short...in several areas." For instance Acxiom's European operations led to a decrease of about $4 million in profit in a year-over-year comparison.
According to Morgan, the estimate for fiscal 2006 international revenue will be reduced to fall between $170 million and $190 million, representing a 10 to 20 percent drop from FY 2005. Acxiom, however, is maintaining its long-term expectation of 5 percent to 8 percent for international revenue growth. Additional expectations include taking a restructuring charge of about $20 million in Q2 of FY 2006, related to its expense-reduction initiative. Excluding changes to its international revenue expectations and the restructuring charges, Acxiom is not adjusting its fiscal 2006 financial road map estimates.
Lou Agosta, an independent technology consultant, sees Acxiom's underperformance as specific to the company and not indicative of the entire sector. "I don't think it's a bellwether for third-party data aggregators, which have been in the news because of a variety of issues around how good the data is, how secure it is, and is the business model valid." Instead, Agosta maintains that the earnings miss is tied to Acxiom's taste for acquisitions. Some of its acquisitions include ChinaLOOP, a BI, CRM, and data management company based in Shanghai in October 2004; the Consodata companies based in England, France and Spain, in March 2004; and the Claritas Europe group of companies in January 2004.
"I think there are certainly issues about data aggregation and there are certainly tons of privacy issues there, [but] I think this has to do with their acquisition spree..." Agosta says. "They'll have their problems digesting all of these acquisitions, but that's a hazard of the acquisition approach." Even so Agosta notes that Acxiom is "basically a well-managed company....I think that this is a bump in the road for them."
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