Analysts Downplay Signs of Acxiom Trouble

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Acxiom Corp., Conway, AR, this week said that it would eliminate about 250 of its employees, or about 5 percent of its work force, later this month. A spokesman for the data-processing company said the staff reductions would come from throughout the organization, and were not specifically related to any of the several acquisitions the company has made during the past two years.


Some stock analysts suggested that the layoffs were routine and driven by the company's own stringent policies for growth, but others quickly downgraded the company's stock and lowered their price targets. The stock, already languishing in recent weeks, slipped even further last week to near its 52-week low of $16.50.


Carla Cooper, an analyst with Robert W. Baird & Co., Milwaukee, said she thought the layoffs were not related to any specific unit of the business that was underperforming, but rather were a routine cleansing of personnel that some companies go through to eliminate workers who are not pulling their weight.


"I think there was a focus on this coming out of a leadership meeting that they had this summer that got managers particularly focused on making sure they had the right people on the payroll," she said.


Robert V. Bolen, an analyst at J.C. Bradford & Co., Nashville, TN, agreed, noting that the company is continuing its plans to ramp up its overall workforce for the next two years through the expansion of its headquarters facilities in Conway and in Little Rock, AR. The company said it expected to add about 1,200 jobs through those projects.


"We don't see this as layoffs per se, it's just getting rid of the underperforming people," he said.


Acxiom said that in many cases the positions themselves would not be eliminated, just the people who filled them.


"We are going to continue to aggressively recruit new people, and hire and train them," said Dale Ingram, the Acxiom spokesman.


The news about the staff reductions, which was leaked to a local newspaper after the company notified its employees that the changes were pending, came at the same time that Barron's, the weekly financial newspaper, published a story in which it suggested that Acxiom was coming under increased pricing pressure. The report cited various indicators in the company's balance sheet and the terms of a recent contract with Allstate.


Cooper and Bolen downplayed the Barron's article, which also suggested that Acxiom might have fiddled with its accounting to meet its quarterly earnings expectations for the most recent quarter.


"I've known this company a long time, and to think that they are stretching their accounting treatment to hit some numbers is ludicrous," said Bolen. "They would much more quickly lower expectations to get in line with what they think they are going to do than to make up some set of numbers to meet the Street. That's just not their style."


The article suggested that Acxiom might have noted a one-time gain in the quarter that ended in June so that its profits would meet analysts' expectations. The company did meet analysts' estimates for the quarter, but denied that it took the gain, which was a reversal of previous charge, in an effort to hit its profit expectations.


"It's a $700 million company, and there's always adjustments to be taken or reserves to be taken or not taken," Bolen said. "I believe they saw this reversal coming up and then chose to spend some money elsewhere or increase reserves elsewhere to show [the expected per-share profit of] 18 cents, instead of 20 cents."


The article also suggested that Acxiom's recent renegotiation of its data-supply agreement with Allstate could be evidence that the company was facing stiff price competition because it would be realizing less profits from the newly negotiated deal.


Cooper, however, said that the less profitable terms of the Allstate deal better positioned the company for future, more lucrative contracts with the insurance giant in the area of value-added marketing services.


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