Atlantic Data Services Inc., a systems integrator for banks, is looking to the Internet for a post-year-2000 boost.
The Quincy, Mass.-based company has specialized recently in preparing its clients' systems for year-2000 complications. It knew that this part of its business -- which contributed 64% of its revenue in the April-June quarter -- would eventually dry up. But it was stung by a series of events in the last 12 months that have dramatically reduced its revenues, income, and stock price.
The result is that Atlantic Data, which has been public for 18 months, is probably at a low point in its 20-year existence.
"The last year has been difficult in banking and for those associated with banking," said Robert W. Howe, chairman and chief executive officer.
"I think the business is improving," he added. "Banks are starting to understand what their (business) models will look like, and they'll certainly start spending more on electronic commerce, Internet banking, and customer relationship management.
"And I do not see any slowdown in acquisitions going forward, so the future to us looks very good."
Atlantic Data works primarily for merging banks. Its clients include Zions Bancorp., Fleet Financial Group, and Fifth Third Bancorp. The company's 235 technology consultants are working on projects at 25 banks, all of which have more than $10 billion of assets.
Atlantic went public in March 1998 at the height of the year-2000 spending boom, raising about $25 million in a $14-per-share offering. The stock appreciated steadily through most of 1998 and reached its high of $25 on Nov. 2.
Mr. Howe said things started to unravel in September 1998 as bank prices started to slide because of Russian loan defaults, hedge fund bailouts, a slowing in the merger pace, and reduced spending on information technology.
Those cost-containment efforts hurt companies like Atlantic Data. National City Corp., a major customer, ended its relationship at the end of 1998.
According to BancBoston Robertson Stephens, Atlantic will rack up only $6.3 million of revenue in its fiscal second quarter, which will end Sept. 30, 65% less than in the comparable 1998 quarter. The company is expected to lose $2.3 million from operations, versus net operating income of $4.2 million a year ago. Its shares closed Friday at $3.625, down 58% for the year.
The changing market conditions were "unforeseeable," said Steven S. Birer, an analyst at BancBoston Robertson Stephens. "The merger and acquisition business can be great if you get a client," but "sometimes you can lose a client too."
Mr. Birer rates Atlantic "long-term attractive" and says it is on the verge of an upturn because it has several new contracts in the pipeline and bank mergers and acquisitions are about to accelerate.
Mr. Howe said his company is seeking new growth in electronic commerce, moving to enhance its abilities in customer relationship management technologies and helping banks integrate systems across multiple distribution channels, including branches, call centers, and the Internet.
In August the company hired Nancy T. Egan, a 25-year veteran of technology businesses, as vice president and director of customer relationship management. Ms. Egan's former employers include Innovative Systems Inc. Hercules Inc. and Mellon Bank Corp.
Mr. Howe also said he expects Atlantic's alliance with home banking technology vendor Corillian Corp. to help it land new business in on-line software installations. "Electronic commerce and Internet banking is obviously the hot area right now," he said.