Sapient's Short Term Problem (SAPE)

| About: Sapient Corporation (SAPE)

Sapient Corporation (NASD:SAPE), the big consulting and tech services company, announced a slowdown in its business and the market pushed the stock down 20% to about $6.25. Over the last 52 weeks the stock has traded as low as $5.00 and as high as $8.96.

The company said first quarter revenue would be about $88 million instead of the $95 to $100 million guidance previously given. Margins will be about 3% instead of the 7% to 9% forecast earlier. The margin news was especially bad. The company put most of the blame on a deferral of $4 million in revenue. The costs for performing much of the work for the revenue remained in Q1, thus pressuring margins.

Given the company's performance over the last several years, it is surprising that the company was not given more benefit of the doubt.

Revenue in 2005 was $333 million and operating profit was $20.7 million. Revenue in 2004 was $266 million and was $194 in 2003. Most companies would envy that kind of growth.

As technology becomes a larger component of most company's operating costs, the need for services from firms like Sapient should actually grow. At $88 million, revenue would still be up about 10% over the same quarter a year ago.

Sapient has a clean balance sheet and only trades at 2.9 times sales according to Yahoo!Finance.

The slowdown may be a bump in the road, but it is hard to imagine it is more than that.

SAPE 1-yr Chart

Douglas A. McIntyre is the former Editor-in-Chief and Publisher of Financial World Magazine. He is also the former president of Switchboard.com, which was the 10th most visited site in the world at the time, according to MediaMetrix. He has been chief executive of FutureSource LLC and On2 Technologies, Inc. and has served on the boards of TheStreet.com and Edgar Online. He does not own securities in companies he writes about. He can be reached at douglasamcintyre@gmail.com.