Expected Revenue Loss, Staff Cuts Spark Acxiom Stock Drop

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Acxiom Corp. stock hit a 52-week low of $10.25 on June 25, dropping more than 40 percent from its closing price of $17.69 on May 29. The drop resulted from a company layoff of 7 percent of its workforce, or 412 employees, as a cost-saving measure in response to an expected $6 million to $9 million first-quarter earnings loss.


"Our revenues have weakened over the past five months largely because our customers dramatically cut back their marketing expenses," said Charles Morgan, CEO of Acxiom Corp., Little Rock, AR.


The company took the actions necessary to reduce its expense base to between $17 million and $20 million, he said. To accomplish that, the company reduced the number of employees, the use of external consultants, computer and building expenses and executive pay. In early April, Acxiom instituted a voluntary and involuntary pay cut, which helped the company save about $15 million, he said. Through the June 25 pay reduction, all executives who had not participated in the voluntary cut had their salaries reduced 15 percent, Morgan said.


"Acxiom wrote off its old legacy data management systems and shifted its focus toward building the new Abilitec customer data integration software. The company laid off staff that was responsible for the old legacy system," said John Schneller, senior analyst at CIBC World Markets, New York. He added that Acxiom could not afford to continue supporting the legacy technology while building Abilitec.


"Acxiom's falloff is clearly macroeconomic-related. Their data warehousing business fell off the cliff in mid-February with the demise of Oracle's business," Schneller said. Oracle is a world supplier of software for information management.


"If Oracle is having difficulty, it's not too big of a leap to think that Acxiom data warehousing business will be slowing. To make a comparison, as goes [General Motors], so goes the auto sector," he said.


Schneller added that consequently chief financial officers have not been allowing their companies to implement new technology projects.


"The Abilitec product just started to crank up sales when Acxiom hit the macroeconomic doldrums, but at the end of the day, it will be wildly successful," Schneller said.


He rates the stock a strong buy with a 12-month price target of $20. Abilitec will be successful because the software drives business for Acxiom into its clients' other sectors, he said, adding that it leads to additional database sales and data processing work. Schneller said the company sold $100 million worth of Abilitec software last year and recently announced that it would close 20 new contracts by the end of the second quarter, which started July 1.


Acxiom provides database marketing and management services to blue-chip financial institutions, publishing companies, retail companies, insurance companies, hi-tech corporations and telecommunications companies, Morgan said. Its clients include Allstate Insurance Co., AT&T Corp., Bank of America and Procter & Gamble. Morgan attributed the downturn in business primarily to a decrease in spending by Acxiom's hi-tech clients but noted that the company has not lost any clients in the past year.


Acxiom plans to continue growing all sectors, with a heavy focus on financial clients, Morgan said. Long term, the company is looking to focus efforts on integrating its database management software into customer relationship management providers such as IBM and Oracle in order to branch out to those companies' smaller CRM clients.


Acxiom later this year will launch Personicx, a household-based segmentation system that uses Infobase, the company's data collection system.


Acxiom revenues were $1.01 billion for the year ending March 31. The company expects up to $900 million in revenues for 2002, with earnings at 28 cents to 33 cents per share.


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