The direct marketing industry didn't escape the miserable performance that characterized the broader markets in 2002, with teleservices one of the DM segments that struggled the most.
“The [teleservices] industry has been under a lot of pressure,” said Jeff Nevins of First Analysis Securities Corp., Chicago. “There is a significant amount of domestic excess capacity among all CRM outsourcers, and that has been one of the reasons why stocks have been down and operating margins have been hurt.
“Some business has moved from the U.S. to offshore locations such as India, the Philippines and Costa Rica” due to cheaper labor costs, he said.
For 2003, revenue growth and earnings are expected to be sluggish for most of these companies, he said. “We are expecting modest improvements at some companies and a down year for others.
“They continue to see pressure on margins, excess capacity in the U.S. and decreased calling volumes,” he said. “Some of these companies have a high exposure to the telecom industry, and some are paid on a per-call basis, and we've seen reduced calling of telecom and wireless subscribers by some of these companies.
“Also, the companies that provide outbound telemarketing have seen decreased calling activity as a result of a cutback on outbound telemarketing campaigns,” he said. “A lot of credit card companies that have had outbound telemarketing promotions have pulled back on that.”
Among the more notable DM News Portfolio companies suffering stock setbacks in the sector:
· ACI Telecentrics Inc. reached a new 52-week low Dec. 23 at 11 cents. It was at 23 cents Dec. 31, down from 27 cents Nov. 25 and $1 on Dec. 31, 2001.
· RMH Teleservices Inc.'s price stood at $19.10 on Dec. 31, 2001, but slid to $11.61 as of Nov. 25 and $10.50 on Dec. 31.
· TeleTech Holdings Inc. stood at $7.26 at year-end, down from $7.82 on Nov. 25 and $14.33 on Dec. 31, 2001.
· ICT Group Inc. fell to a new 52-week low Dec. 16 at $9.77. Its recent end-of-month prices were $11.59 (Dec. 31) and $15.52 (Nov. 25). It stood at $18.61 on Dec. 31, 2001.
· West Corp. was at $24.94 on Dec. 31, 2001. On Nov. 25 it was at $16.99, and $16.60 on Dec. 31.
· Convergys Corp. was at $37.49 on Dec. 31, 2001. On Nov. 25 it sold for $16.45, and $15.15 on Dec. 31.
· MKTG Services Inc. fell to a new 52-week low of 10 cents Dec. 27. It sold for $3.18 on Dec. 31, 2001, but plummeted to 30 cents Nov. 25 and 14 cents Dec. 31.
· Sitel Corp.'s new 52-week low came Dec. 19 at $1.10. As of Dec. 31, it sold for half of the $2.40 price it held Dec. 31, 2001.
The Federal Trade Commission's announcement last month that it will establish a national do-not-call list will further hurt teleservices firms in 2003, Nevins said.
“The biggest question we have is what it means [regarding] the definition of customers or prospective customers,” he said. “If outsourcers are unable to call existing customers … for cross-sell and upsell opportunities, that would have a considerable impact on the industry.”
In other news, the stock price of Group 1 Software was adjusted for a 2 for 1 split.
