US banking systems vendor Sanchez is to cut 12% of its workforce after revising earnings and revenue forecasts downwards as banks continue to defer spending. The company has also been hit by a $1.1 million bad debt provision for the second quarter after the closure by client Santander Central Hispano of its Patagon direct banking operation.
In a trading statement, Sanchez says it expects to meet its forecasted revenue range of $21 million to $25 million and earnings (loss) per share range of $(0.01) to $0.03 for the second quarter ended 30 June, 2002.
Citing softer than expected sales of software licenses attributable to delayed technology buying on the part of financial institutions worldwide, the company also lowered its 2002 annual revenue and earnings forecast. The vendor is now forecasting a revenue range of $94 million to $98 million and an estimated earnings range of $0.09 to $0.11 per share. These figures include a maxmimum $900,000 restructuring charge aginst staff lay-offs.
"Our original forecast anticipated a second half recovery in IT spending for our software license business and our expense levels supported that forecast," says Frank R. Sanchez, the company's chief executive officer. "While activity is definitely increasing among prospective financial institution clients, many of these opportunities are now planned for 2003."
The $1.1 million bad debt set aside from the termination of the Patagon contract follows a write-off of $1.7 million in receivables. The loss has been offset by a one-off award of $1.7 million in an arbitration claim brought by the vendor against 1st Webbankdirect, a division of Sovereign Bank. As the 1st Webbankdirect implementation was an outsourcing solution, the company says it had not previously recognised the implementation revenue or direct costs related to this contract but will do so in the second quarter.