The Tampa company's centers will eventually answer most consumer calls about Procter & Gamble's products.
By SCOTT BARANCIK
Published July 1, 2003
TAMPA - Are Pringles vegetarian? Is it safe to brush my cat's teeth with Crest? Will Herbal Essences shampoo improve my sex life, or are those commercials just a put-on?
Procter & Gamble Co. manufactures nearly 300 widely known products. Answering questions about them is costly, especially with customers in about 130 countries.
Its solution? Hire Sykes Enterprises to take the calls.
Under a five-year, $70-million deal unveiled Monday, the Tampa company eventually will handle about 70 percent of P&G's total call volume, or about 6-million customer calls, letters and e-mails per day.
"Beginning in November, they'll take over all our calls in Latin America, and some of our calls in the U.S., Europe and Southeast Asia," P&G spokesman Damon Jones said. "We'll continue to transition more and more business to Sykes over time."
Florida workers will benefit significantly from the deal. Sykes' call center in Palatka will handle most of the questions, complaints and compliments from North American customers, Jones said, and is expected to add employees. P&G will lay off 200 workers over the next five years to accommodate the change, with other positions eliminated by attrition.
Procter & Gamble employees will retain control over the toughest 30 percent of customer calls, such as those involving serious health issues or other specialized information. "A call on Bounty paper towels is very different from a call on Vicks NyQuil," Jones said.
It's unclear how profitable the deal will be for Sykes, which had a net loss of 46 cents per share in 2002. Chief financial officer Mike Kipphut declined to discuss expected margins, or to predict when the deal would become profitable. But he said it would be wrong to assume that low-tech deals like the one with P&G are necessarily less profitable than high-tech ones.
Sykes beat out two bigger rivals for the contract. One finalist, Convergys Corp., is about five times Sykes' size and has its headquarters in the same city as P&G, Cincinnati. The other, Sitel Corp. of Baltimore, has on its executive team a former Sykes insider, Dale Saville.
But Jones and Kipphut said Sykes, which operates a global network of 41 call centers, had several advantages.
Sykes engineers will design a software program that not only tracks and manages customer calls, but also provides P&G with valuable data on customer likes and dislikes. "What do consumers all over the world think of Tide today, and do they like its new scent? We don't have a system to answer that question," Jones said. P&G currently uses multiple software systems at its many locations.
Sykes' multilingual employee base was another edge. Its call center in Edinburgh, Scotland, will handle virtually all the calls and languages of Europe. In Southeast Asia, calls will be consolidated at Sykes centers in Manila, Philippines, and Bangalore, India. Centers in Sao Paulo, Brazil, and San Jose, Costa Rica, will answer Latin American callers.
CFO Kipphut said Sykes' other competitive advantages include the company's global telephone infrastructure, similar to a long-distance telephone company's, and its redundancy and disaster recovery systems.
For Sykes, the Procter & Gamble deal is a confidence-booster.
The sluggish global economy and the misfortunes of some high-tech clients have driven Sykes' profits and revenues south. The company's decision to shrink its U.S. operations and grow exponentially overseas has earned kudos from cost-conscious clients but hisses in rural America, where Sykes is slowly closing call centers. Sykes expects to shut a 3-year-old, 393-worker call center in Hazard, Ky., next month.
The deal also will help Sykes in its continuing effort to diversify its client base beyond computer hardware and software companies. Investors and analysts say diversification is the best way to protect against a downturn in any one industry, and Sykes has made substantial progress in the past two years.
P&G's willingness to go public about the arrangement may also pay dividends in terms of drawing other high-profile clients. Most of Sykes' customers demand confidentiality.
A much smaller part of Sykes' new contract will require it to mail coupons, refunds and product brochures to certain Procter & Gamble customers. Kipphut said Sykes will outsource such work in the United States but handle it itself in Europe.
Initial reaction on Wall Street was tepid. Analyst Brandon Dobell of Credit Suisse First Boston called the deal a "long-term positive" but retained his rating of "underperform," or sell, on Sykes.
The company's stock rose 4 percent Monday, or 19 cents, to close at $4.84 per share.
Sykes Enterprises of Tampa beat out two other publicly-traded companies for a $70-million contract with Procter & Gamble Co. of Cincinnati. Here's a look at their 2002 results.
Company/Headquarters/Employees/Revenues/Profit per share
