Z-Tel to trim 400 jobs in cost-cutting

The move highlights a day of contrast among bay area tech companies, as some talk layoffs and others profits.

By Times staff reports

© St. Petersburg Times, published February 1, 2001

Phone company Z-Tel Technologies is firing 400 workers, including 125 in Tampa, to reduce costs.

Yet Reptron Electronics and Digital Lightwave are enjoying solid increases in revenues and earnings. And Kforce.com has narrowed its losses.

A slew of Tampa Bay area technology companies reported their earnings, or their expectations, to Wall Street analysts Wednesday. The results reflected the deep troubles that face tech companies nationally in this unsettled economy. But they also demonstrated that there are winners and losers even in the technology sector.

Z-Tel Technologies

TAMPA -- Z-Tel Technologies, which offers local telephone service in 17 states, will cut as many as 400 jobs and trim marketing expenses.

Up to 120 jobs will be eliminated at the money-losing company's Tampa facilities. Many of them are data entry positions that Z-Tel says it no longer needs because new technology has improved its efficiency. The company expects to have about 1,700 workers after the reduction.

"Most people understand the economy," Z-Tel chief executive Gregg Smith told analysts Wednesday in a conference call. "We have a pretty close-knit company and we hate to see this happen."

Z-Tel said it expects to meet estimates on revenue and subscriber growth when its quarterly earnings are released in about a month.

However, the company also said it has as many as 25,000 accounts with overdue bills. It will not include those accounts in its subscription numbers, which had been estimated at 340,000 at the end of 2000.

The company has been plagued with complaints about service, billing and slamming -- commandeering customers who did not want Z-Tel to be their phone provider -- but executives said that new systems will reduce those problems.

They still anticipate reaching 380,000 to 400,000 subscribers by the end of the first quarter. The company predicts first-quarter revenue of $70-million to $74-million, compared with the estimated $68-million for the fourth quarter of last year, but they offered no predictions of earnings. The company reported losing $30.7-million, or 92 cents a share, for the quarter ended Sept. 30.

The job cuts should be complete by the end of the first quarter, Smith said, estimating savings of up to $3-million a quarter. The company also will trim about $4-million this quarter from its marketing budget.

Mark Johnson, Z-Tel's secretary and treasurer, said an employee could handle up to 100 or more new accounts a day with the company's new system, compared with about 15 sign-ups a day under the old system.

Z-Tel stock closed at $5.44, up 30 cents. -- Times staff writer Dave Gussow

Recent coverage

Z-Tel execs put accent on growth (November 3, 2000)

Reptron Electronics

TAMPA -- Reptron Electronics peppered investors with evidence of how it is better prepared than some of its fellow tech companies to weather an economic downturn.

Exhibit one: its fourth-quarter results.

The Tampa electronics manufacturer and distributor capped a turnaround by reporting net income of $2-million, or 30 cents a share, for the quarter ended Dec. 31. That met the revised estimates the company gave in October. In the fourth quarter of 1999, Reptron lost $600,000, or 9 cents a share. Revenues surged 49 percent to $160-million, compared with $107-million in the year-ago period.

For the year, Reptron said net income was $5.7-million, or 83 cents a share, compared with a net loss of $8-million, or $1.30 a share, in 1999. Sales increased 60 percent to a record $576-million, compared with $359-million the prior year.

Perhaps more important, the company predicted continued strength, with sales up to $160-million and earnings between 25 cents and 30 cents in the first quarter.

Several customers have cut back on electronics orders, opting to wind down their inventories, but Reptron nevertheless forecasts net income between $1.35 and $1.55 a share on sales in the $700-million range for 2001.

"We're seeing . . . softening in some areas of our business, (but) we've taken some strategic positions to try to soften those blows," said chief executive Michael Musto.

One key strategy: trying to entice companies to use Reptron for logistics, product design and manufacturing as well as a supplier. The new emphasis on cross-selling recently netted the company its largest-ever piece of business with one client, Musto said, declining to give any details.

"Our balanced model should help us weather whatever comes at us in 2001," Reptron president Paul Plante said.

Several analysts tracking the company gave management kudos during a conference call, and Wall Street followed suit. Shares closed at $11.75, up 75 cents.

-- Times staff writer Jeff Harrington

Recent coverage

Investors critical of Reptron (October 26, 2000)

Digital Lightwave

CLEARWATER -- Digital Lightwave Inc. beat analysts' earnings projections in the fourth quarter, but its volatile stock price slipped amid fears of a high-tech spending slowdown.

The Clearwater company, which makes testing equipment for fiber-optic communication networks that are the backbone of the Internet, reported earnings of $13-million, or 40 cents a share. That was up from $3.9-million, or 13 cents a share, in the year-earlier quarter. Analysts were expecting earnings of 26 cents a share for the quarter that ended Dec. 31.

Revenues almost doubled to $33.9-million, up from $17.5-million.

For the fiscal year, Digital's revenues hit $100.7-million, up from $50.5-million. Earnings for the year were $31.9-million, or 98 cents a share, up from $5-million, or 17 cents a share.

Despite that performance, the company's stock price, which had traded as high as $150 last March, closed Wednesday at $43.94, down $2.13. Digital stock lost 13 percent of its value in the past week.

Gerry Chastelet, chairman and CEO, said the company was expecting something of a slowdown in the first quarter. The quarter is traditionally the slowest time of the year for Digital, and the industry is suffering fears of a potential recession. Yet so far no customer has canceled an order for the company's first quarter.

"We believe that if we do see a slowdown, we are not insulated," he said in a conference call with analysts. "But we believe our moves into new international markets will offset that."

The company also is trying to expand its work force by 20 percent, mostly by recruiting more engineers for research and development and opening customer support centers.

-- Times staff writer Mark Albright

Recent coverage

Turning others' misfortunes into opportunity (January 15, 2001)

Kforce.com Inc.

TAMPA -- Kforce.com Inc., the staffing company that began reinventing itself as an Internet player 18 months ago with flashy ads and massive marketing expenses, has turned conservative. But it hasn't quite turned profitable.

In a conference call with Wall Street analysts, the Tampa company formerly known as Romac International Inc. reported a net loss for the year of $283,000, or 1 cent a share. That compares favorably to a year prior loss of $23.5-million, or 53 cents a share, but fell short of expectations that Kforce would end 2000 with 5 cents per share in earnings, according to analysts' estimates gathered by First Call/Thomson Financial.

Revenues for the year were $795-million, up 6.5 percent from $746.6-million in 1999.

For the fourth quarter, revenues rose 10.3 percent to $200.1-million compared with $181.4-million a year ago. Net income was $10,000, or 0 cents a share, compared with a net loss of $33.9-million, or 77 cents a share, for the same quarter in 1999.

The company has worked to cut back spending that Wall Street analysts considered excessive.

Kforce touted its Web transformation in 1999 by spending $4.5-million on Super Bowl ads. "You'll note we were not a Super Bowl advertiser this year," president and chief executive David Dunkel said. "We've taken a pretty conservative posture."

The company, which has nearly 2,400 employees in 40 markets in North America, said it cut about 10 percent of its work force last year. At its Tampa headquarters, that meant a loss of about 150 positions; Kforce's local work force is now about 400.

Kforce projects earnings of 6 cents to 8 cents in the first quarter on revenues of $185-million to $190-million, and executives said the company will continue to reduce costs through job cuts.

"We'll continue to terminate marginal producers," Sanders said. "But since those are mostly field people, I would think the impact in Tampa would be nominal."

Kforce expects revenues for 2001 to be $750-million to $800-million, with earnings per share of 35 to 38 cents, Sanders said. The company's stock, which was trading at more than $16 per share a year ago, closed Wednesday at $3.25, down 44 cents.

-- Times staff writer Kris Hundley

Recent coverage

Kforce buys back shares, brief (November 7, 2000)

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