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Keane bests estimates; profits dip

The computer services firm reports first-quarter earnings a penny above analysts' revised expectations but also says profits were significantly lower than its year-ago period.

    Computer services firm Keane today reported first-quarter earnings a penny above analysts' revised expectations but also said profits were significantly lower than its year-ago period.

    Net income for the quarter was $5.5 million, or 8 cents per share, on revenues of $216.2 million. That compares with net income of $30.2 million, or 42 cents per share, on revenues of $285 million in the same period in 1999.

    Analysts surveyed by First Call expected the Boston-based firm to earn 7 cents per share, which were revised estimates after Keane warned that it expected first-quarter earnings to fall short of forecasts due to a decline in its Year 2000-related consulting business.

    Like other old-line consulting firms, Keane has been busy revamping its strategy to focus on capturing more business e-commerce engagements. Rivals EDS and CSC, and even Big Five management consulting firms such as Andersen Consulting and KPMG, have been trying to develop additional practices or business units to specifically target companies that are moving their businesses to the Web.

    Earlier this month, Keane formed a new consulting group aimed at helping companies build their Web businesses. The newly formed Keane Consulting Group will help clients build Internet businesses and e-commerce sites. Keane also recently formed a new business unit called Keane Interactive, which provides clients with Web design, strategy, development and interactive advertising.

    Keane attributed the slowdown in its revenues growth to a "buying freeze" at several large companies who chose to hold off on computer systems work due to possible Y2K-related problems. During the quarter, the company said it secured a number of projects, especially in the areas of Web design, development and business e-commerce work, that will help it sustain growth for the second half of this year.

    "The buying 'freeze' among many large customers is dissipating, and Keane's revenues, utilization and margins are improving as our business units come back online," Keane CEO Brian Keane said in a statement. "With record new bookings during the quarter, we expect continued improvements throughout our business operations for the remainder of the year."