Right after canceling its initial public offering for e-Profile in mid-December, Sanchez Computer Associates Inc. fired the top two managers of the division, the company has confirmed.
e-Profile provides core systems outsourcing for Internet-only banks and traditional banks Web offshoots. When the spinoff was withdrawn Dec. 14, Sanchez, of Malvern, Pa., cited adverse market conditions: Michael Sanchez, chairman of the parent company and the chief executive officer of e-Profile, said the dot-com doldrums would have blinded the equities market to e-Profiles real value.
Mr. Sanchez confirmed last week that the IPOs unraveling cost e-Profile chief operating officer Greg Derkacht and chief financial officer Dave Schlenker their jobs.
We built a management team for e-Profile to run as an independent public company, and now a second management team is not needed, Mr. Sanchez said in an interview. There was some redundancy we had to deal with, because it is not our current intention to take e-Profile public separately.
No other workers in the 200-employee division have been fired, Mr. Sanchez said.
Matthew Fassnacht, a senior equity research analyst at J.P. Morgan Chase & Co. in New York, said that, despite the firings and IPO withdrawal at e-Profile, he thinks Internet banking in general is about to hit a major positive inflection point and that e-Profile in particular is well positioned.
E-Profiles early customers included Internet-only banks such as X.com, which shut down in early December after 11 months in business, and Bank One Corp.s WingspanBank.com, which was stand-alone but has been folded into Bank One proper. It is past that first wave of clients, Mr. Fassnacht said, and building Web banking platforms for traditional powerhouses including American Express Co., Lehman Brothers, Morgan Stanley & Co., and General Motors Acceptance Corp.
These companies will be more successful than start-up banks without a brand name, Mr. Fassnacht said. They are all blue-chip companies doing this and have chosen Sanchezs e-Profile, so I think that business is on the verge of really blooming into something more interesting than when they just had start-up banks.
Joseph Garner, director of research with Emerald Research in Lancaster, Pa., said the e-Profile experience should not be seen as an indictment of Internet banking.
I think the electronic banking industry is evolving, he said. There will be a large role for Internet banking, because financial services are commodity services, and to be successful, banks have to utilize the lowest-cost distribution channels.
Sanchez does not appear to have been thrown off by the aborted IPO. On Jan. 16 it announced that it expects to post a profit for the fourth quarter, after Wall Street had predicted it would lose 5 cents a share. It said license revenue was better than expected and it has scheduled a Feb. 8 conference call to discuss the quarters results.
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