Burntsand Inc.’s management has taken the first steps to restructure its business in an effort to boost sagging revenues.
“”We need to get profitable,”” said Blair Baxter, interim CFO of the business solutions integrator, citing costs in the cost services line and admin.
For its third quarter
fiscal 2003 results, Burntsand reported a decrease of 37.7 per cent or $28.92 million in revenue on a year to date basis from the $46.4 million reported for the same period in 2002.
While the industry is down in the 12 to 15 per cent range on average, according to a CDN study of the health of the industry, Burntsand is doing worse than that, said Albert Daoust, market analyst of Evans Research Corp. of Toronto.
A couple of weeks after the third quarter results were announced, Baxter rejoined Burntsand as interim CFO.
On Nov. 19, the company announced CEO Mel Steinke was leaving, to be replaced by company founder and chairman Jim Yeates.
Stephen Li, equity analyst for Raymond James Ltd., said the market was expecting something, as evidenced by Burntsand’s stock price, which fell the day after the Nov. 19 announcement from 31 cents a share to 26 cents.
Asked about the meaning of the management change, he said: “”The previous management had set a target which has not been met. The board decided to go in a different direction.””
Last month’s announcement confirmed that when the company cut 23 per cent of its entire staff and closed its Ottawa office, which made up six per cent of Burntsand’s employee base, but generated only two per cent of the company’s professional services revenue.
“”You look at that and say, ‘is that the right investment decision for the company?'”” said Baxter.
Until there’s a clear definition in leadership from the federal government, the political direction delays the company’s sales within the federal government, said Baxter, recalling an expression that he and his colleagues used back when he worked in Ottawa during the Gulf War to describe the Ottawa market.
“”If it looks like a Scud, smells like a Scud, you could sell it to the government. If you weren’t selling that, you weren’t selling much.””
Baxter admitted the firm also made some poor investments in Sun Microsystems products.
“”We make the best judgements we can based upon the information we have. Sun has historically been a big partner. We have made some investments in Sun and sometimes they pay off, and sometimes they don’t.””
Brad Keates, vice-president of marketing and partners for Sun Microsystems Canada said Burntsand’s lack of success had very little to do with Sun Web services. “”Burntsand is like a lot of companies where it’s facing a really tough time, because of the economy, IT spending slumps, and in general, because Web services have only recently begun to take off.””
Steinke once said the company does not expect to reach “”operating profitability”” until fiscal year 2004. Baxter declined to comment on when the firm would return to profitability.
Daoust and Li are cautiously optimistic about Burnstand’s chance of recovery in the short term.