July 20, 1999 6:50 AM PDT
Cambridge Tech at a turning point
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The consulting firm is struggling to rebuild lost momentum as cofounder Jim Sims, who held the position of president and CEO since Cambridge's inception in 1991, steps down to work on more "entrepreneurial endeavors." The company yesterday appointed board member Jack Messman as its new CEO.
"It's been nine years of straight work," Sims told CNET News.com. "I want to take time off to create another company...to challenge the norms."
Sims, who announced his resignation yesterday, admitted that he was torn about the decision of leaving the company he helped grow from $9 million in sales to more than $600 million. Several months ago, he came to the conclusion that the "next wave of growth for the company is very operational," and he said that his "heart and soul" was just not into it.
"It's not that I can't do it, I just don't want to do it," he added. "There's never a right time for a CEO to leave, but it's my time to do something different."
Recently, the Cambridge, Massachusetts-based consulting and systems integration firm experienced some troubled waters with its reorganization plan.
When Cambridge reported first-quarter earnings that met Wall Street's revised estimates, the company said it will take a one-time charge of between $7 to $9 million in its second quarter to cover a "repositioning and retention" program intended to help the firm keep, retrain, and move employees. As reported, the company said the program stems from decreased demand for enterprise resource planning services and growing demand for interactive and Web-based offerings.
Due to its falling stock valuation, industry observers have said that Cambridge has widely been looked at as a takeover target. The company's stock has touched a 52-week high of 55.5 to a low of 10.62. In yesterday's trading, Cambridge shares fell 0.31 to close at 19.93.
One analyst speculated that Sims was the roadblock to a sale. "They had offers on the table," said the source, who wished to remain anonymous. "He was the roadblock to that. Removing him could be someone trying to make sure the thing gets sold."
Still, Sims, along with his replacement, Messman, continue to affirm that Cambridge is not up for sale.
"I'm committed to the long haul," Messman told analysts and reporters during a conference call held yesterday. "I'm not here to sell the company, I'm here to run the company."
When Cambridge decided to restructure its business in North America and on an international scope, Sims said the company knew it would take several quarters until it would begin performing again.
"Clearly, as a public firm, nobody likes restructuring," he said. "As a leader, I have to ignore that [Wall Street's pessimism]...we're paid to reposition the firm for the long term."
In June, Cambridge reported second-quarter earnings in line with analysts' consensus estimates. As reported, adjusted for certain items and charges, the company earned $7.9 million, or 13 cents per share. Revenue for the quarter increased to $163.5 million from $156.6 million in the same period a year ago.
Messman said that major reorganization is well under way and nearing completion. He added that he won't be asserting changes to Cambridge's strategy, but understands there are some tactical issues, which he will definitely be pursuing.
In the next 90 days, Messman, 59, said his objective is to get up to speed and make certain of all the operational issues he needs to address. Prior to his appointment, Messman was on Cambridge's board since 1992 and came from Union Pacific Resources Group (UPRG), a North American independent oil and gas exploration and production company. Before UPRG, he held positions in various industries, including technology, environmental services, and banking.
While Sims wouldn't offer any specifics related to plans for a new venture, he did say that it would be tough to duplicate what Cambridge experienced. And as for thoughts on his new replacement, he wouldn't really go into further detail except to say, "The board made a decision...I'll support any decision they make."