PeopleSupport shares tank on weak 2008 outlook
March 7 (Reuters) - Shares of business process outsourcing (BPO) company PeopleSupport Inc PSPT.O touched a new 52-week low on Friday, a day after it forecast 2008 results well below market expectations as some of its technology clients were facing a slowdown.
PiperJaffray downgraded the stock to "neutral" from "buy," on falling revenue from the company's client EarthLink Inc (ELNK.O: Cotización), increased competition from multinational BPO providers and a deteriorating macro environment.
"We are concerned EarthLink, the company's fourth largest client, may now be retracing Vonages' steps, leaving another significant revenue hole to fill," analyst Mark Marostica said in a note to clients.
In March last year, Vonage Holdings Corp (VG.N: Cotización), which contributed $14 million to PeopleSupport's 2006 revenue, had not renewed it contract with PeopleSupport, allowing it to expire in May 2007.
Marostica cut his price target on PeopleSupport's stock to $8.50 from $16.
Cowen & Co analyst Moshe Katri said the 2008 outlook reflected more weakness from two of its 10 top clients, EarthLink and Expedia Inc (EXPE.O: Cotización) and the impact from weaker utilization rates.
He maintained his "neutral" rating on the stock.
For 2008, the company had forecast earnings of 47 cents to 58 cents a share, on revenue of $162 million to $170 million. Analysts on average were expecting earnings of 72 cents a share, on revenue of $180.3 million, according to Reuters Estimates.
Shares of the Los Angeles-based company were trading down 33 percent at $7.63 in midday trade, after hitting a low of $6.77 on Nasdaq. (Reporting by Sayantani Ghosh in Bangalore; Editing by Vinu Pilakkott)
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