IT spending is not down. It will continue to
grow, but more slowly than in the past.
problem with SAPE is more with unrealistic expectations
than with a collapsing market.
Also, SAPE can
easily grow revenues.....the trick is to maintain
margins, which have been historically very high.
recent times many companies panicked into overspending
on ebiz and were not very price sensitive. Part of
this was based on competition from dot coms....now
that that threat has diminished greatly, many
companies are taking their time and doing alot more in
house......and when they do select a consultant they are tighter
with the budget....
As always, I am not
presenting myself as all knowing about the future.......the
future is inherently unpredictible.....but when you buy
a stock you have to make judgements about it's
My judgement is that SAPE is overvalued, will not
sustain 33% EPS growth over a long period, and is at
significant risk of not making next years
Make your own judgement, but please don't suggest that
I have any evil motives in presenting my
P.S. It's tough to compare the
Andersen business model....it's a partnership and it's
financials are not public.....but they did grow revenues
damn fast for a long time. Alot of that growth was
based on long complex projects (ERP or big Defense
systems) that took years to complete. It's a different
world now, with many projects requiring fewer people
over shorter periods.
there's been alot of back and forth, but my basic
argument isn't exactly as you set it out....my basic
argument is this:
1. During normal times, tech
services companies are worth anywhere from 1-3 times
revenues based on what they sell for in private
transactions. In the past few years lots of deals got done for
cash that implied a higher multiple....but most of
those are now selling for less than 1 times revenues
(MRCH, CATP, and others). Using this measure SAPE is
worth anywhere from $5 - $15 using trailing year
2. During normal times, solid growth stocks sell for
a PEG (PE to EPS Growth) of 1. Year to year SAPE is
now expected to grow EPS 33 % (.46, .61). Assuming
you believe next years projections and think 33% EPS
growth is sustainable, you can come up with a fair
valuation on this measure of $15 - $20 depending on which
year you apply the measure to.
3. There is more
downside risk in next year's earnings than upside
potential. Despite every competitor bringing down
expectations and fears of a slowing economy....Sapient has
maintained it's outlook.
4. Sapient's stock has been
tanking suggesting bad news on the horizon. Stocks
usually don't bottom on worry alone....it usually takes
cold hard facts to force out all the weak hands. It's
possible that worry is overblown and SAPE will not be
negatively impacted by the industry wide slowdown......but I
don't buy it.
In the end it seems to me that the
risk is by far on the downside, and there is limited
Even if I were 100% confident of SAPE earning .61 next
year, I would still only give it a 30 PE or a $18
value. Of course I don't have that certainty so I need a
discount from that......which gets me to my fair value
right now of $12.
Keep in mind that even a 30 PE
is quite high for normal times, and believe me
things are getting more normal everyday as dot com mania
dies.....and we may even have a recession.
At $12 there
is enough upside to justify the risk, but it's still
risky in my book.
The other thing that suggests
that SAPE was/is a bubble stock is that despite
marvelous growth ....anyone who bought the stock in the
past 2 years is underwater. This flies in the face of
common sense and suggests that expectations got way out
of hand.......and are now being deflated.......It is
always risky to predict a bottom in such a dramatic
bubble. Often, you are just as shocked at how low it can
go, as you were (or at least should have been) how
high it went.
>My words are seldom without rationale, so you
can always provide alternative theories about where
is fair value for SAPE....
Oh, you seem to
have rationale, but so far, from what I can tell, it's
largely unsupported by any fact.
1) SAPE is overvalued because it can't possibly
continue to grow at more than a 40% clip simply because
Preposterous. This has got to be
the worst example of anecdotal evidence I've ever
seen. CATP failed to grow for lots of other reasons
besides the law of large numbers (i.e. poor vision,
failed to change successfully, etc.). You yourself
confirmed that Andersen has grown at a similar rate. Even
Andersen has reinvented itself better than CATP over the
2) SAPE could not possibly do well in a downward
You say you've spent time in the industry, but yet
you seem to lack a basic understanding of how it
actually works. I too have been in consulting for a long,
long time and I've seen many economic cycles.
Companies experiencing market difficulties are quick to
call in consultants. And let's face it, the dotcom
competition may have softened, but IT spending is just not
down. I challenge you to show me one shred of evidence
that proves that IT spending (especially for
e-business projects) has been curtailed (and I want numbers
- not anecdotes!) If you really talked to anyone in
the industry instead of just making up stuff, you'd
3) SAPE is going down because people
have all of a sudden figured out that the company is
This is just plain silly. Did you listen to the last
earnings call? There was no downward guidance for 2001.
I'll grant you that perhaps much of the air has come
out of the Internet balloon since March, but there's
just no way you can honestly tell me that there's no
correlation with the broader market sell-off. It's easy to
sound prescient when everything's
>Focus on the ideas and analyses and not on the
I'm focusing, I'm focusing, but I don't see much
beyond unsupported claims. To my knowledge, you haven't
yet directly answered anybody's challenges on this
board with anything resembling cold, hard fact. Until
that time, I regard you as a shorter with a mission.
As others have stated, it is awfully curious that
you spend so much time on the Sapient board (and no
others in this sector) when you have no position in it.
Just stating my
I can't say that I have strong feelings about
people I don't know personally, but all of my thoughts
about SAPE are sincere.
I follow stocks, I
follow this industry closely...these are just
opinions...don't be afraid of them...just take them for what
The truth is none of us really
knows the motivations of any others.....so you just
have to be critical of what you read....
cifrocco, buddy....I think I can make a pretty good
argument that so far I have been right......doesn't that
count for something ?
I am not railing you just
because you are trying to make SAPE holders feel more
comfortable about their investment....despite what I believe
is an overvaluation.....
words......it's always good to be skeptical in this type of
forum....there are certainly alot of idiots out
My words are seldom without rationale, so you can
always provide alternative theories about where is fair
value for SAPE....
But instead you seek only to
undermine my credibility......
Focus on the ideas
and analyses and not on the personalities.....it will
serve you better.
You're inviting JBD to another messageboard so he
can consult you guys on that stock the way he's doing
Well guess what? JBD could care less
about IIXL and all the retail, small-time investors on
that board. He's really only interested in SAPE.
Doesn't that strike you as a little odd? If he cares
about his fellow investor shouldn't he be doing his
rounds on other boards, preaching his gospel to as many
as possible, as you so desperately
Again, I ask, what is his motivation for posting here so
frequently, so eloquently, so convincingly? Until the answer
to that question is found, I will always doubt his
words, just like I do those of a short basher or a long
We seem to be a little too naive and we forget how
the world is made. It's all about money and the
relentless pursuit of it, in this setting it can only happen
at the expense of our fellow investor. Dog eat dog.
Do you think JBD really has your interests at heart?
Time is money and that goes as much for him as for
everyone else. Why is he wasting all this time on this
board if there is no payback for him? C'mon guys, wake
the hell up.
This was the point I was trying
to make a few days ago, but it went largely ignored.
your point about Sapient being the imitator is a
it just underscores how stupid
people behave when a stock price rockets as SAPEs did.
many, if not most, people don't even understand SAPEs
business.....and say, for example, how it differs from a software
Sapient is an aggressive company, which has grown sales
dramatically. Unfortunately the business model of consulting is
not that great....it relies on increasing headcount
one-for-one with increasing sales....compared to software
sales where once you write the software your upside is
only limited by the number of copies you
sell.....that's an asset that's much easier to manage that
consultants which can bolt to a competitor or ask for more
money or sue the company......etc. etc...
to your point, though......many buyers of this stock
don't have a clue about Sapients business.....and
certainly anyone that was willing to pay 40 times sales,
30, 20, 10 times sales...etc.....is either a fool
(lots of those in the market), a blind buyer (index
funds forced to buy), someone playing with someone
elses money (a fund manager), a trader, or a
The only rational ones in the group are traders and
shortsellers. Traders are just playing the supply/demand and
understand the foolishness of the valuation, and
shortsellers recognize that the price is too high......the
rest of the group is foolish.
How can you CLAIM SCNT, CATP are imitators of
Sapient? It shows your shallow knowledge. Sapient imitated
Fixed Price/Time strategy of CTP and remember most of
originial Sapient employees are Ex-CTPers. And regarding
Scient, they wont even compete in the same space. Scient
is not a fixed time /Price. Scient only does
e-businesses whereas Sapient does every thing from
Client-Server to ERP.
This is absolutely the best postings I've seen
yet on this board in years...
A very good read
from an ex: Android, SAPE-oid person.
thing I'd like to note, is all those people who joined
in the first year since public (4/1996) have had the
ability to exercise all of their options before the
market fell as they had 4 year vesting
Hopefully they smartly divested some of it, and can afford
to wait a few years for the stock to
The employees who started later also got good stock
in the ESPP which rewarded nicely in the past
years... and any SAPEr reading this knows how they want
this thing to stay low through 1/2 when they lock in
for another 6 months.
As long as they keep
staying staffed, and keep working they will make
earnings. Simple as that. I haven't heard of any low
staffing rates lately... has anyone?
Yeah, yeah, yeah. So it's the same arguments over
and over, huh? Nothing new to add to the discussion?
For a supposed industry insider, you really have
little knowledge from which you speak, other than to say
the economy is slowing (thanks alot!) and that the
stock price is falling because investors are suddenly
becoming rational again (now that's a joke if I've ever
heard one). You clearly have no real working knowledge
of Sapient, just vague generalities and comparisons
to poor imitiators like SCNT and MRCH and
> unfortunately for the employees
investments are very boring. and especially when they
consider it may take them 5-10 years to make what the
early folks made in a year or 2.....it's not going to
look so attractive.
Gee, if all investors are
suddenly rational now as you argue in all your posts, why
should employes be any different in looking at SAPE as
an investment? And where else are they going to go
in this market for something "more exciting or
lucrative"? Apple? I think NOT. And if that's your argument,
why would anyone in their right mind go to AC, PWC,
Deloitte or any other private firm for the same
>When stock prices come down from absurd levels, many
people delude themselves into believing that bottom has
just been reached and it can't go down any
I like to think that I'm not generally delusional,
but history also shows that what goes down also goes
up. Remeber the crash of 1987? I do. I didn't
>1. Sapient will do even better in a slowing economy.
Big companies need even more help and MBA's are gonna
flock to the company !
For a former Android, you
should realize that this is the case. But you were
probably on the TIS side, and can't see the forest for the
trees. Frankly, I'm surprised at you. Big companies need
help ESPECIALLY when economies turn sour so they can
"change to be more successful" (yeah, I know the AC
motto). And as someone who is very in touch with what's
going in the MBA job environment, I'm well aware of
where people are going, and MBA campuses ARE good
indicators of the economic environment. Sapient is a HOT
commodity right now on campuses because it is viewed as a
stable consulting firm that was not just invented
yesterday. In fact, I'm told that right after the recent
MRCH layoff announcements, Sape received a flood of
walkup resumes for strategy consultants.
Employees want cheap shares.
can't see that these arguments are crap spewed from
investors that love Sapient and can't detach themselves
from a fantasy world should check into a clinic for
sick investors. Basically, the authors of these silly
ideas can't foresee any circumstance that might
actually be negative for Sapient and it's stock
Again, you missed my point. My point isn't that there
isn't any negative circumstance for Sapient, but rather
that it's not as one sided as you make it seem in your
endless and repetitive posts. Not to mention that you
would like us to believe that you spend probably 3-5
hours a day posting on a message board that you have no
vested interest in just to tell us "irrational
investors" the sky is falling. I say,
>some people fall in love with stocks......and can't
seem to accept that maybe they are going down for good
I'm not in love with it, but I don't necessarily buy
the "good reason" that your "unbiased" posts are
putting forth. You just don't seem to have enough
knowledge of the company to back up what you post. I've
noticed too many inaccuracies.
Again, just MY