Interesting, doing some quick back of the proverbial envelope analysis. If you look at the four most recent quarters for Sapient vs a couple of competitors, it still seems that despite the much heralded Velocity program, the SG&A is still dragging down its performance vs its competitors. Consider:
Sapient: Gross Margin 31.1%, SG&A/Revenue 29.7% leaving a measly 1.4% Margin after Project Labor and SG&A.
Accenture: Gross Margin 29%, SG&A/Revenue 16.6% yielding 12.4% Margin after Project Labor and SG&A.
Cognizant: Gross Margin 43%, SG&A/Revenue 23.3% yielding 20.1% Margin after Project Labor and SG&A.
EDS: Gross Margin 13.4%, SG&A/Revenue 8.3% yielding 5.1% Margin after Project Labor and SG&A.
Wipro: Gross Margin 31.6%, SG&A/Revenue 11.3% yielding 20.4% Margin after Project Labor and SG&A.
So, whether you compare Sapient against similar US/Indian firms such as Congnizant, low cost US providers (EDS), full-service consulting/outsourcing (ACN), Sapient is still consuming too much of its gross profit with SG&A expenses vs. its rivals. When the market slows and revenue flattens this will only drag down performance more...
Net-net, at these cost levels, the recent stock declines are merely indicative of long-term cost issues....
This is a longstanding SAPE problem. Far too many "internal" projects with people twiddling their thumbs in cambridge. Far too many non-billable SVPs VPs and Directors who just dont pull any billable weight.
When I was at ACN even the partners are required to bill.
Sape either needs to clean house or get bought (by someone who will gut the losers and merge the company into a lower cost op model)