My job description: trade stocks. when i take a position in a stock i use Yahoo boards like a diary, though sometimes it contains useful information as well (few and far btwn). writing things down (posting) forces me to clarify my own thoughts.
for what it's worth, jbd.
Looks like CATP all over again, but without the management credibility problem. Despite Sapient's reversal of fortune, management still seems to have a decent reputation with analysts and investors (though I think much of it is undeserved and simply based on it's remarkable ability to market it's stock to analsysts and investors).
CATP management alienated everybody everywhere and never recovered a shred of respect. But similarly they bet the bank on e-whatever and neglected the ERP business.
Both companies went in search of premium rates and shunned the areas where rates were falling.
But the long term problem with ERP, CRM, etc., which still exists today, is that you are competing head-to-head with the software publishers. Increasingly the software publishers are looking to their own services divisions for revenue and earnings growth. The software publishers are happy enough for 3rd parties to sell licenses for them when business is booming, but when things are less frenetic they are in a better position to take the whole pie.
The traditional argument is that the 3rd parties like Sapient have better knowledge and capabilities. This probably has some truth, but it becomes less and less convincing in a less frenetic business environment - clients aren't screaming "i need it yesterday", they're screaming "i can't afford to do it all now", AND good employees are easier and easier to find for the publishers.
And there's the employee wage issue. Did Sapient pay below market rates to employees because of the historical riches available in the stock options and stock purchase plans ? If so, this will pressure wages up just as fees are plummetting. And if Sapient ignores the pressure, they lose the most capable and marketable people.
Some have suggested that management has enough credibility that employees will keep drinking the Kool-Aid......personally I doubt it, though I do admit management's reputation has held up remarkably well despite the cratering stock price and business prospects.
Anyway I don't think I would want to compete with the software publishers which can discount services to sell licenses.....PeopleSoft seems to be growing services big time, Oracle is pitching 90 day CRM implementations, and Seibel's growth is slowing. Still money to be made by Sapient and others but it's getting harder and harder for lower and lower margins.
Is there a next big thing ? looks like it could be a while, and when you're already a large company (like Sapient) the chance of capitalizing big time is diminished.
Takeover possibility remains, but $10 per share would be a big stretch. More likely 1 times sales plus cash: $6.75 to $7.50.
In the meantime downside risk of continued business deterioration.
Best to wait until it's a value stock at 1 times sales or less: $5.00
One Man's Most Humble Opinion.
Certainly custom dev is no longer demanding premium rates. ERP, CRM, and *very* domain specific expertise is. Too bad SAPE let all that kind of talent go during the dot-bubble. Fifty-mil went to buy exor and they proceded to retrain or let go every talented individual there. Big goof.
Earnings will tell all but based on the ANSR call the only groups (Lines of Business) growing are those focused on package implementations of larger solutions from Peoplesoft Oracle Siebel etc...
The custom dev is getting creamed. SAPE is way off the mark with this offshore and DEV heavy model - They need to focus on the large packages....
I see red
I think you make good points, but consider these possibilities:
1. In the post dot com bubble world, many companies will be more focused on cost (rather than speed to market with a solution). If the other players are offering cheaper offshore labor as an option, it is simply something which cannot be ignored. Frankly, I don't think Sapient had any choice but to beef up this part of the business. Of course there are challenges, but if your competitors are ramping up here......you have no choice.
2. While the co-CEO's might consider Sapient their baby and be reluctant to sellout, the stock market has a funny way of disciplining stupidity. Sometimes it takes a while, but the market always wins. Either way the path toward offshore development remains the correct one.......it's just a matter of whether the company can afford to build it up, or create it via a merger. Personally, I think merger is the correct option.
3. As far as business picking up....sure, it will happen evenutally, but it won't be nearly as fun. It's pretty easy to get positive energy going when your growth and stock price is exploding making some employees very rich........but that bait is gone.....gone forever....or at least until the next bubble which is probably many years away. Don't get me wrong though....the trend toward technology and outsourcing remains solid, but it's going to be pretty boring compared to the go go days.