Business Intelligence Watch

SARBANES-OXLEY "CELEBRATES" THIRD ANNIVERSARY

How times have changed.

With the third anniversary of the Sarbanes-Oxley Act coming up tomorrow, it's being reported that most financial executives view the law as a net gain overall for investors.

A survey by Approva Corporation reveals something of a reversal in the business sector's outlook regarding the legislation as 44 percent, compared with 43 percent expressing the opposite opinion, report the net gain.

The survey conducted by the business software company also revealed that 87 percent of senior financial managers cited the legislation as a "top priority" for their company boards.

When asked to select a phrase characterizing Sarbanes-Oxley, 42 percent of respondents said it is a "way to improve our business controls and processes." Also, 8 percent said it will primarily "improve investor confidence and help our business." In addition, 28 percent called it "a corporate tax."

In areas such as additional personnel, outside consultants, IT tools as well as internal and external audit, a "substantial majority" said costs had increased by less than 25 percent with almost one-fourth of respondents saying expenses had risen by less than 10 percent.

Regarding firms with more than $1 billion in revenue, 75 percent held cost increases for staff, tools and auditors to under 25 percent, with 52 percent posting cost increases under 10 percent.

Of the financial executives surveyed, 66 percent are using advanced documentation tools while 42 percent are automating the testing of controls. Also, 24 percent are outsourcing compliance efforts. Only 5 percent believe outsourcing is the most effective way to cut Sarbanes-Oxley spending. In addition, 37 percent said documentation tools are most effective and 29 percent view automated controls testing their key approach.

Other findings included: 62 percent of CFOs said their position is less desirable than it was five years ago due to the law; and 57 percent of executives surveyed believe Sarbanes-Oxley has made American firms less competitive globally.

By Glenn J. Kalinoski, Executive Editor, Customer Inter@ction Solutions

FTC TO INDUSTRY: PAY 'TIL IT HURTS

As if the headaches associated with the national Do-Not-Call list weren't enough, there's more to deal with thanks to our good friends at the FTC: increased fees, 40 percent greater, to be exact.

Effective Sept. 1, companies accessing the registry will be forced to pay $56 per area code and a staggering $15,400 for firms accessing 280 area codes or more.

The current rates, which went into effect Jan. 1, are $40 per area code and $11,000 for 280 area codes or more.

But there's at least one bit of good news: the first five area codes will be available free of charge (which will help small businesses that do a limited amount of calling), and entities that are exempt such as political groups and charities will still be able to access the registry for free.

The FTC reminds the industry that telemarketers are required to renew their subscriptions to the Do-Not-Call Registry annually. They must also remove registered numbers from their call lists once every 31 days.

"The Do-Not-Call Web site for telemarketers – http://www.telemarketing.donotcall.gov – will inform them when their subscription account numbers (SANs) expire and give them renewal instructions," said the FTC in a press release. "Subscriptions can be renewed up to 30 days before a subscription has expired. Subscriptions also will be renewable after they expire. The new 12-month subscription period will run from the first day of the month in which an organization renews, regardless of whether it renews before or after its current subscription ends."

And what's the total number of consumers who have registered their phone numbers on the list? About 98 million.

And, just in case anyone was wondering, the commission vote to issue the final rule was 4-0.

By Glenn J. Kalinoski, Executive Editor, Customer Inter@ction Solutions

STUDY: COMPANIES MUST RE-THINK HOW THEY VALUE CUSTOMERS

Reduce investment and training in customer service call centers at your own risk.

That's the message for companies looking to cut back in this area as firms can expect severe financial consequences should they make such a decision.

A study undertaken by Ernan Roman Direct Marketing has revealed various insights into the importance of customer service.

The bad news is that most recent customer call center experiences have not been positive as 66 percent report negative or neutral experiences. The result is not surprising. If a customer has a negative experience calling a customer care center, 95 percent perceive the company negatively. The result: the likelihood for repeat purchasing declines by 86 percent. Also, 83 percent will be unlikely to recommend the company to others.

By Glenn J. Kalinoski, Executive Editor, Customer Inter@ction Solutions

AVAYA PLEASES WALL STREET WITH QUARTERLY PERFORMANCE

Wall Street approved of the results released following the close of the market yesterday by Avaya Inc.

The company, which designs, builds and manages communications networks for businesses, posted income from continuing operations of $194 million during its third fiscal quarter, or 40 cents per diluted share. The total included what was described as the net favorable impact of $123 million "related to the settlement of certain tax matters and other deferred tax adjustments."

Earnings per diluted share would have been 14 cents without these items, which represents an improvement over the 12 cents per diluted share recorded during the same quarter a year ago based on income from continuing operations of $58 million.

In addition, quarterly revenue was up 21.7 percent to $1.236 billion, including the benefit of acquisitions, as opposed to $1.016 billion a year ago, Also, $126 million in operating cash flow was generated during the quarter as the company retired substantially all of its debt.

New relationships with Juniper Networks, Nokia and RIM were cited by chairman/CEO Don Peterson.

And how did Wall Street reward the company?

After its stock closed at $9.23 yesterday, it opened today at $10.25 and was at $10.75 in afternoon trading today.

One report today cited Morgan Stanley as maintaining an "equal-weight" rating on the company as the research firm was quoted as saying: "Avaya appears to have gotten itself back on track following two quarters of operational miscues. Our fundamental view is that business trends should improve through the calendar year and that Avaya should generate substantial free cash flow. Over time, we think the company's strategy should enable it to take share in the transition to VoIP from vendors less successful at navigating this transition."

Standard & Poor's Equity Research reiterated a "hold" rating and was a bit more subdued in comments that appeared in a different report.

"While sales growth continues to improve, we think pricing pressures will restrict overall profitability expansion. We view Avaya as well positioned to benefit from accelerating demand for IP telephony."

By Glenn J. Kalinoski, Executive Editor, Customer Inter@ction Solutions

FORESEE OFFERING NEW CUSTOMER SATISFACTION FEATURES

Customer interaction and business intelligence services provider SafeHarbor Technology Corporation will announce tomorrow that partner ForeSee Results, a Web site satisfaction survey development company, will offer new customer satisfaction capabilities. They are designed to complement SafeHarbor's current services suite, assess customer service improvements for ROI and provide forward-looking business intelligence.

In addition, Washington State is deploying the customer satisfaction analysis capabilities to measure the effectiveness of Web self-service applications on the Access Washington portal (http://access.wa.gov).

The new capabilities, from measuring the aspects of the customer experience that drive customer satisfaction and future behaviors to prioritizing improvements, are a result of the SafeHarbor-ForeSee partnership.

INTEL DRAWS PRAISE FOR FINANCIAL REPORTING FREQUENCY

For those of you who don't follow business news during the weekend, an AP story Saturday mentioned that "many stock watchers" believe companies should increase the frequency with which they communicate with investors.

"Some experts" were cited as saying firms should report results monthly or daily since additional information would cause stocks to be less volatile "and managers would have a harder time gaming their results."

So, what company received praise for the frequency of its reporting?

Intel Corp. was mentioned as offering a middle-of-the-quarter conference call. They feature such information as gross margins, detailed revenue forecasts as well as expenses such as R&D, taxes and depreciation.

Steven Wallman, who from 1994 to 1997 was a SEC commissioner, revealed that firms could "easily post real-tine information" on the Web.

"The markets are real time," the AP quoted Wallman as saying. "If you're getting something every day, what it is at the quarter becomes a much less relevant notion … It's one way to eliminate the shortsightedness that seems to be creeping into the market."

Wallman is CEO of FOLIOfn Inc., a proxy advisory, financial technology and brokerage company.

By Glenn J. Kalinoski, Executive Editor, Customer Interaction Solutions

DEATH MEANS PAYING $1 FOR PLACEMENT ON DO-NOT-CONTACT LIST

Remember the old saying about death and taxes?

Well, it seems there's a new tax on death.

Well, not a tax, just a $1 fee.

The Direct Marketing Association has announced the establishment of a Deceased Do-Not-Contact List in order to have the dead removed from commercial marketing lists.

All DMA members must honor the DDNC list, which will also be made available to non-member companies. It will include the deceased individual's name, address, phone number and e-mail address. The information will be maintained on a special do-not-contact file to be updated on a monthly basis.

An Internet link has been established that funeral directors, hospitals and doctors' offices will be encouraged to provide to friends, relatives and caregivers of the deceased, who may register the information at the DMA's Consumer Assistance Site.

So where does the $1 fee enter the picture?

It is the credit card verification fee that, according to the DMA, serves two purposes: to ensure a permanent record of those who registered the information; and to help prevent misuse or fraud.

By Glenn J. Kalinoski, Executive Editor, Customer Inter@ction Solutions

ONE SET OF RULES, NOT 50, BEST SUITED FOR TELEMARKETERS

I'll make this admission right up front: I was a telemarketer.

For several years while I was a college student during the early 1980s I worked for long-distance provider MCI selling its services along with hundreds of others at a location north of New York City where we scratched out an existence at about $6 an hour. But for many the job provided needed money for tuition and books and, for some who were not in their late teens or early 20s, crucial second incomes.

Fast forward about two decades and we see a recent headline on msnbc.com: "Do Not Call List Under Attack, Activists Say. Battle Brewing As Telemarketers Ask FCC to Nullify Tough State Laws."

As if almost 100 million Americans on the federal Do Not Call list wasn't enough, the story with the "Attack" headline mentions "those pesky telemarketing calls" without discussing the jobs the industry provides. But it does cover the petition asking the feds to exercise "exclusive jurisdiction over interstate telemarketing calls." It goes on to describe the laws various states have on the books that further restrict the industry.

Also mentioned is that telemarketing groups are attempting to "open the door to a floodgate of new calls," so says the Electronic Privacy Information Center.

And what is the industry looking to get from Washington?: Just one set of rules without the nightmare of complying with the whims of 50 state governments.

Indiana Attorney General Steve Carter is quoted as saying there will be "an avalanche" of calls if the FCC backs the telemarketers.

According to the story, Indiana, along with Florida, New Jersey, Wisconsin and North Dakota, have stricter laws than the federal Do Not Call rules. In the Hoosier State, calls may not be placed to those on the state's list. But under the federal law, consumers on the DNC list, which, according to the story, is administered by both the FCC and FTC, may be contacted if they have an existing business relationship with a company.

EPIC's Chris Hoofnagle predicts "the phone is going to start ringing off the hook."

He cites as a "big loophole" the EBR exception, claiming that it would lead to "millions" of solicitation calls.

"Every month, people shop at dozens of places. Buying a cup of coffee can create a 'relationship' that would allow the coffee shop to call you, even if you are on the Do Not Call Registry," he was quoted as saying. "I really see this as an opportunity for there to be a lot more telemarketing."

Does this mean that all those who are addicted to their daily double latte at Starbucks will be disturbed with calls after arriving home from a stressful day at the office?

I think not.

Also covered was that federal law permits automated calls by computers while Florida outlaws the practice. Calling in Louisiana is not allowed on either Huey P. Long Day or Acadian Day.

The FCC is looking for comments on the states-vs.-federal government matter. The deadline is July 29. The commission may issue a ruling at a time of its choosing.

One person not buying EPIC's argument is FTC spokesperson Jen Schwartzman, who was quoted as saying "the federal list is working well."

She shot down the argument regarding the EBR exemption by stating that those called by firms they have done business with may ask to be removed from a company's list.

"There is that extra layer of protection," she was quoted as saying. "You can always request to be taken off their call list and they have to comply. Having an [EBR] is not a life sentence to get telemarketing calls."

Under the Do Not Call Rule, a company may call consumers whose numbers are on the national registry if the firm has an EBR with the consumer, unless the consumer has asked not to be called. Companies with whom a consumer has an EBR may call for up to 18 months after the last business transaction with the company. Also, since 1995, the FTC's Telemarketing Sales Rule has required companies to maintain a company-specific do not call list and to honor consumers' specific requests that they not be called. Such requests must be honored, even if the company has an EBR with the consumer. Companies are not allowed to call former customers whose numbers appear on the national registry after the 18-month period has expired.

The FTC has reminded businesses that, before calling a former customer based on an EBR, they must be sure that the relationship has not expired and that the customer has not made a specific request not to be called. Firms hiring third parties to conduct telemarketing on their behalf are responsible for making sure that telemarketers obey federal law by: downloading the pertinent area codes from the no-call registry; scrubbing their call lists every month; ensuring that EBRs are current prior to contacting consumers whose numbers are registered; and honoring company-specific do not call requests.

By Glenn J. Kalinoski, Executive Editor, Customer Inter@ction Solutions

eGAIN DOESN'T WAIT TO ANNOUNCE GOOD NEWS

eGain Communications Corporation isn't waiting to spread the good news regarding its good fortune. 

Though the provider of contact center and customer service software plans to announce its financial results next month following an audit, it has announced preliminary results for the quarter and fiscal year that concluded at the end of last month.

It expects quarterly revenue to be between $5.5 million and $5.8 million as opposed to $4.7 million a year ago. Also anticipated is revenue for the fiscal year to be in the range of $20.1 million and $20.4 million compared with $19.6 million in fiscal year 2004.

eGain also expects to report approximately break-even results from operations for the recently concluded fiscal year compared with a loss of $4.4 million in fiscal year 2004.

NO FORGIVENESS FROM 'THE STREET'

There is probably no less a forgiving place than Wall Street.

Take the news from headset marketer Plantronics after the close of the market Tuesday.

The company announced fiscal first quarter revenues of $148.9 million, up about 13 percent from $131.4 million. But net income fell to $21.7 million, down from $22.3 million last year.

"Revenues were toward the low end of our guidance, with the shortfall primarily in our Office and Contact Center products," the company said. "Much of this was concentrated in Europe where wireless office revenue growth stalled amid slightly weaker economic conditions and a stronger dollar. For the company as a whole, revenues were also limited by delays in achieving volume shipment schedules on our new products. Gross margins came in at 49.1 percent versus our estimate of approximately flat in comparison to the 50 percent gross margin in the fourth quarter. The three principal factors contributing to the difference were the lighter contribution from OCC revenues, costs we incurred to prepare for production ramp on new products, and a return to warranty costs typical of levels a year ago but higher than recent trends had suggested."

The market reacted swiftly, as the $38 closing price Tuesday dropped below $36 in afternoon trading Wednesday.

Also reporting after the close of the market Tuesday was Intel, with president/CEO Paul Otellini proclaiming that "Intel delivered record second-quarter revenue, with growth of 15 percent versus a year ago" in a press release that carried the headline: "Intel Posts Record Second-Quarter Revenue of $9.2 Billion."

But it was reported that the company's profit margin was lower than anticipated. The result: The Tuesday close of $28.71 turned into a Wednesday open of $27.09.

On the other side of the spectrum was Epicor Software. The enterprise software solutions provider posted total revenues for the second quarter of $71 million, compared with $48.6 million in the prior year's quarter, for a growth rate of 46 percent. License revenues amounted to $19 million compared to $12.2 million in the second quarter of 2004, up 55 percent. Service revenues reached $51.2 million compared with $35.6 million in the second quarter of 2004, up 44 percent.

But more important was the report that the company beat its earnings-per-share expectation by a penny. The reward was an increase of almost $2 per share between Tuesday's close and Wednesday afternoon.

Finally, there's the story of Convergys Corp., which provides outsourced customer care, employee care and integrated billing software services. Prior to the market opening on Wednesday it reported an 11 percent drop in second quarter net income, citing an $8.3 million severance charge in its Customer Management Group. The CMG second quarter operating income and operating margin were $7.1 million and 1.7 percent, respectively. This compares to prior-year operating income and operating margin of $29.7 million and 7.1 percent.

"In addition to the severance charge, the decrease in operating margin is largely the result of increased costs related to expansion of capacity, acquisitions, and the company's branding campaign, and higher operating expenses caused by the impact of a weakened U.S. versus Canadian dollar," the company reported.

But the key to Wall Street's reaction was in a report that stated, excluding severance charges, earnings would have been greater than the average estimate of analysts polled by Thomson First Call.

The bottom line: a 4 percent increase in the price of the stock Wednesday.

By Glenn J. Kalinoski, Executive Editor, Customer Interaction Solutions

LAYOFFS AT HP CLOSE TO 15,000

The news of the massive restructuring along with thousands of layoffs at Hewlett-Packard Co. came as no surprise Tuesday since reports regarding the decision came out last week.

But the details contained in such major announcements are always buried in the press release issued by the company. Tuesday’s news was no exception.

The headline was that 14,500 positions – about 10 percent of total headcount -- would be eliminated over a six-quarter period.

But the real news deals with where the pain will be felt. Most of the positions to be eliminated will be in support jobs in the areas of finance, HR and IT with the remainder within business units. The company will also eliminate its Customer Solutions Group that handles the SMB market along with public-sector customers. It will combine the sales function into the Personal Systems Group, Imaging and Printing Group and the Technology Solutions Group. Also, CSG executive vice president Michael J. Winkler will retire after CSG is dissolved.

Job eliminations will be minimal in sales positions with little change in R&D.

One person not feeling any discomfort at HP will be chief information officer Randy Mott, formerly CIO at Dell and Wal-Mart, who reportedly received an eight-figure package that includes bonuses and stock options.

And while Mott enjoys his deal, CEO/president Mark Hurd showed that layoffs were only part of the equation. As of next year, the pension and retiree medical program benefits will be frozen for employees who don’t meet the “defined criteria based on age and years of company service,” HP said.

In addition, a report stated that headcount was reduced by 1,600 during the first half of the fiscal year and an additional 1,400 workers will be eliminated through October. HP employed 151,000 workers at the end of October 2004.

The move will result in pretax restructuring charges of about $1.1 billion through the next six quarters, starting in the fourth quarter of fiscal 2005, excluding a prior $100 million restructuring charge to be taken in the third quarter.

Also anticipated is yearly savings of $1.9 billion beginning with fiscal year 2007, including $300 million worth of savings regarding benefits along with $1.6 billion in labor costs. The company expects savings in the range of $900 million to $1.05 billion in fiscal 2006.

And how has Wall Street been reacting lately to developments at HP?

The stock has been trading near its 52-week high of $25.07.

By Glenn J. Kalinoski, Executive Editor, Customer Inter@ction Solutions

About Me