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StarTek Inc. Reports Drop in Second Quarter Earnings, Announces New Client
[August 02, 2005]

StarTek Inc. Reports Drop in Second Quarter Earnings, Announces New Client


By TED GLANZER
TMCnet Communications and Broadband Columnist

First the Bad News: beleaguered StarTek Inc., a provider of business process outsourced services that is in the process of a companywide turnaround, announced today that revenue for Q2 05 declined 15.9 percent to $53.2 million, down from $63.3 million during the same time period in 2004.



According to a statement, a "downturn" in the company's supply chain management services accounted for 70 percent of the total decline. Also, an overall shift in revenue mix – different products offered at lower margins - with the company's second-largest client in the business process management service contributed to the revenue reduction.

Overall volume remained flat.


The second quarter financial report is just one of a series of negative events that have transpired in the first half of 2005 for the company, which is publicly traded on the NYSE.

Indeed, in February, CEO Bill Meade, who had held the post since 2001, resigned from StarTek; Steve Butler has held the post since Meade's departure.

In May, the company reported revenue losses during the first quarter of 2005. The financial slide did not sit well with shareholders, who hit StarTek with a derivative lawsuit alleging that the company's stock price had been artificially inflated between Feb. 26, 2003 and May 5, 2005 by officers and directors who issued false statements concerning the company's financial health. Attorneys representing the shareholders are seeking class action status for the lawsuit, which is filed in federal court in Colorado.

The news, however, has not been all bad for the Denver-based company; there are numerous signs indicating that there is a light at the end of the turnaround tunnel.

For example, the Q2 05 report stated that company expenses decreased 2.3 percent. Additionally, the board of directors declared a quarterly dividend of $0.36 per share. Not much, but certainly better than nothing.

Also, Butler announced during a telephone conference call today that StarTek added a new major client and has already started to provide the client with consumer support services. Butler said that he could not divulge the client's identity, except that it is one of the largest telecommunications companies in the United States.

"We took our first call [for the client] on August 1," Butler said during the teleconference.

This addition comes on the heels of the company's June 27 announcement that Nikon Inc. renewed its agreement with StarTek to continue providing Tier 1 and Tier 2 technical support, and pre-sales consultation of Nikon's digital imaging product line.

StarTek also addressed a gap in its management structure today by appointing Rodd Granger as the company's CFO. He has served in the position on an interim basis since last February.

"Looking ahead, my goals and objectives in my permanent role will include continuing to improve our financial performance as we grow the business and secure new opportunities," said Granger in a statement.

In light of all of these items, StarTek looks to continue to experience the growing pains associated with a turnaround. Butler noted that the company's recovery could take anywhere between 12-18 months.

There are, however, plenty of reasons for optimism.

"Our future looks bright, as we have made significant strides in developing business growth," Butler said, noting that the company will continue its efforts to finish FY 2005 strong. "Our client relations remain on solid ground."

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Ted Glanzer is assistant editor for TMCnet. For more articles by Ted Glanzer, please visit:

http://www.tmcnet.com/tmcnet/columnists/columnist.aspx?id=100033&nm=Ted%20Gl
anzer

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