Following on the heels of an earnings warning issued late Friday, Acxiom Corp. announced Tuesday that its employees had their base pay cut 5%, with an option to take a 20% pay cut and receive stock options. The move is part of a $70 million cutback on anticipated fiscal year 2002 expenditures, which will also include sales and marketing expense reductions.
The Little Rock, AR-based company also revised its estimate of the write-offs related to Montgomery Ward’s bankruptcy, saying it would take a $35 million charge, largely in non-cash items such a computer assets and software which cannot be re-deployed. In its third quarter financial statement issued in mid-February, the company had anticipated the write-off as between $25-$30 million.
Acxiom, which had handled customer database operations for the bankrupt Chicago-based retailer and cataloger, expects to wind down its involvement with Wards as soon as the end of April.
The pay cuts were preferable to layoffs, Acxiom company leader Charles Morgan said in a conference call Tuesday.
"We have capable people and we need them," Morgan said, remembering 1991’s downturn, which left the company scrambling to hire employees when the economy ultimately strengthened.
Tuesday’s wage reduction comes at a time when "the economic climate has frozen clients in their tracks," Morgan said.
Characterizing the current business climate as "an increasingly chaotic business environment," Morgan said that the quarter just ended saw spending freezes and layoffs among Acxiom’s customers, affecting their abilities to complete deals.
At least three deals celebrated by the company as final during the month fell through, and one "well known technology company executive" was laid off right before he was scheduled to sign a contract, Morgan said.
According to Morgan, the company did not realize the full impact of the slowdown until recently, and raced to restate its earnings forecast last week. In the middle of the quarter Acxiom anticipated 50 deals involving Abilitec, its suite of customer data integration products and services. As of last Friday only 20 of those had been completed, with another 36 "in limbo."
The conference call did produce one light moment. Asked by an industry analyst if he could forecast Acxiom’s performance next year, Morgan replied "If you give us guidance on the economy, we’ll give you guidance on 2002."
