TeleTech downgrades profits

By Jeff Smith, Rocky Mountain News (Contact)

Published July 18, 2008 at 9:05 p.m.

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TeleTech Holdings Inc. erased $65.3 million of earnings from its books this week, the conclusion of a voluntary review that began last fall of its stock-option practices.

The misreporting of stock compensation, especially in 2000, was the major culprit, but the Douglas County-based call center operator also made $5.6 million of other, mostly lease, accounting adjustments in a restatement that covered 12 years.

And TeleTech announced in its annual report that its option accounting is being reviewed by federal regulators, meaning it may not be off the hook on the stock backdating issue.

But investors tend to look forward, not back, and shares were slammed this week, most likely because of another development: TeleTech lowered its 2008 revenue growth forecast to only 6 percent to 8 percent amid the weakening economy and lower call volumes. The company earned $53.1 million on revenues of $1.37 billion in 2007.

TeleTech shares plummeted 25 percent on Thursday alone and fell a bit more Friday before recovering and edging up 5 cents for the day to $13.32.

Robert Evans, an analyst with the Craig-Hallum Capital Group of Minneapolis, expressed disappointment with the company's outlook but was one of several analysts this week who reiterated a "buy" recommendation. A couple of others posted "neutral" recommendations; one was a downgrade.

"While we recognize and understand investor frustration with the revised outlook, we believe the stock reaction is overdone," Evans wrote.

TeleTech CEO Kenneth Tuchman said in an earnings call Thursday that the slowdown in the global economy has caused customers to reduce their call volumes.

Evans didn't express concern over the stock-option issue in his report and neither did analysts on TeleTech's call.

TeleTech said previously there was no "systematic practice of using hindsight" to select stock-option grants, just "episodic" instances.

It has said certain employees involved in selecting grant dates - employeees who are no longer with the company - may have had some understanding of the accounting implications of their decisions but there wasn't conclusive evidence of willful violations.

In its delayed annual report to regulators this week, TeleTech said the Securities and Exchange Commission and Internal Revenue Service are reviewing the findings and "may pursue inquiries of their own, which could lead to further investigations and regulatory action."

smithje@RockyMountainNews.com or 303-954-5155

TeleTech Holdings

TTEC: Nasdaq

$13.32

UP 5 cents

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