After hitting a new 52-week high Jan. 14, IT services company Sykes Enterprises, Inc (Nasdaq: SYKE) tumbled 50 percent Tuesday after it warned it would come in short of estimates in its fourth-quarter.
Shares were down 23 11/16 to 23 9/16. The company, which provides information technology support services to computer hardware and software companies, has met or exceeded expectations every quarter since its April 1996 IPO.
Sykes said it expects revenue for the fourth quarter to be in the range of $160 million to $162 million and earnings in the range of 20 to 22 cents a share, compared to $142 million in revenue and 28 cents a share for the same period last year. First Call's consensus of 11 analysts has predicted earnings of 37 cents a share.
"The fourth quarter revised forecast is primarily the result of anomalies and does not signal a trend in our business operations, as we continue to experience a strong reception from the marketplace for our bundled service offering," said John H. Sykes, Chairman and CEO.
During 1999, the company continued to expand, opening 16 technical support centers, and experiencing at least a 29 percent organic revenue growth rate.
Three factors created the shortfall, Sykes said. Several customer contracts which required an outlay in costs for training and preparation were inked in the quarter. In accordance with Sykes' accounting policy, revenue was not recognized on those agreements, as they have not yet been officially executed. Because these contracts will be concluded in the first quarter of 2000, Sykes has increased its forecasts for revenue and earnings per share.
Secondly, the operations of Sykes' wholly owned subsidiary, SHPS, Inc. failed to meet expectations. The forecast for its contribution has been reduced for year 2000.
The third negative impact on growth was from foreign currency translation, Sykes said.