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Minyan Mailbag: SRT


Beam me up Scotty!


Note: Our goal in Minyanville is to remove intimidation from the financial markets and encourage an interactive dialogue among the Minyanship. We share this next column with that very intent.

I don't know Startek (SRT) super-well. These are just some off-the-top-of-my-head observations.

Issues surrounding SRT:

  • As you noted, their business is concentrated to an unhealthy degree - with one customer accounting for 40% of the business. And that customer is in a transition mode, with the AT&T Wireless/Cingular merger calling into question the future of the relationship. The current contract expires in 2006 I believe.

  • Outsourcing could potentially impact the company. Many companies have call centers outsourced to India.

  • The decision to raise the dividend recently, while at the same time guiding down a bit in earnings is somewhat unsettling. While legitimate dividend increases are welcome, imprudent ones call into question management's judgment. They are paying more than they are anticipated to earn. The market might have actually responded better to a dividend cut, which would be perceived as a smarter and more prudent approach.

  • The CEO of the company was terminated a couple of months ago and there has been no replacement. In a period wherein some critical issues - new customer wins, contract continuations, etc. - face the company, the market is very skittish about a ship without a captain.

  • In this market it's hard enough to make money in the stocks of companies without "hair" or business issues. The market is very much uninterested in companies with looming uncertainties in their business model and approach.

That having been said, the balance sheet is strong and there is potential for a really good rebound in stock price - if a good CEO is brought on board and there is success in new business initiatives.

They are in Denver, correct? Have you visited the company?

Minyan Rob Fraim


All your observations are right on the money. I have a feeling that the CEO was fired over the dividend, which was enormous relative to the company's cash flows. What did not make sense to me was the timing of the stock drop. It dropped on the news that the CEO got fired, far past the AT&T Wireless/Cingular merger announcement.

I made an effort to visit the company, but that happened at the time when the CEO got fired. The newly hired CFO took his place. The new CEO, who assumed the IR role as well, did not have time to meet with me. Since I only own the stock in my personal account, I dropped the ball. But, I placed another call today. I think my very Russian accent and my proximity to the company scared the assistant to death, so she promised that the CEO will call me back. I will keep you posted on the progress.


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