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Despite Strong First Quarter Results, Contact Centers Still Face Lay-offs

Jun. 01, 2011 2:40 AM ETSYKE, CVS
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 April marks a significant month for most companies as it usually marks the end of the first quarter of the financial year. Results are usually released during April or May to show the how they fared during the first few months of the year. But April was also a disappointing month for many company employees as lay-offs were announced. Outsourcing companiesparticularly those in the call center business were no exception to this as some lay-offs were announced amid good results from majority in the industry.

Recent news on Teleperformance (EPA:RCF) reflects the typical reason for a lay-off, which is a decrease in number of clients. Despite the positive Q1 results of Teleperformance, the biggest lay-off in Florida, in the US since 2003’s credit card issuer MBNA lay-off of 950 employees is to happen at the end of May with Teleperformance announcement of lay-offs. The French contact center management firm is letting go of 860 of its employees in Boca Raton due to a surplus of employees. Teleperformance, is also laying off 360 employees in Orlando. According to the company, the reason for the lay-offs is that they “will no longer be providing support to certain clients,” although they clarify that “[this] is in no way a reflection of the performance of Teleperformance ASD.”

Sykes Enterprises Inc. (NASDAQ:SYKE), another contact center that has locations around the globe providing customer and technical support to its clients, also made an announcement recently that they will be laying off 76 employees at the end of the month. This is due to Sykes loss of a contract. As Kevin Sheilley, President and CEO of Northwest Kentucky Forward stated, “[Sykes] lost a contract, and the employees working on that contract are the ones being laid off.” An economic development official however, has said that the company is trying to snag new business to make up for the loss and to avoid the lay-offs.

HML, a call centre company in United Kingdom, has also decided to let go some of its employees as job responsibilities have been made redundant at the company’s Derry contact center. The company has been on a downward spiral since the last months of 2010 because of a loss of two clients namely Nationwide Building Society and GMAC.

Another company, CVS Caremark Corporation (NYSE:CVS) announced that their company would begin lay-offs of at least 250 employees from its operations. This is due to the closing of operations of its Richardson, Texas office. In CVS Caremark Corporation’s case however, the reason is that they will be undergoing operational restructuring causing the lay-offs although the employees being let go will be consolidated into other contact centers.

But despite challenges in the industry due to lay-offs that have happened and are bound to happen, the outsourcing industry remains strong, as shown by the first quarter results published recently, with many companies attracting more business along various verticals, allowing outsourcing hubs such as India and the Philippines, to further strengthen their position in the global space.

Author: Jamee C.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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