Harris Faces Tough Times

Harris Interactive (HPOL - Analyst Report), a leading global custom market research firm, yesterday reported fourth-quarter revenue of $43.5 million, down 31.5% from a year ago primarily due to the weak economy.

Management said that the global recession had significantly hurt the market research industry, especially in the U.S., where Harris generates over 60% of its business. Quarterly net loss was $0.7 million, or 1 cent per share, compared with a year-ago net loss of $85.7 million, or $1.61 per share.

For fiscal 2009, Harris posted sales of $184.3 million, down 22.8% from a year earlier. Net loss came in at $75.3 million, or $1.41 per share, compared to a net loss of $84.6 million in fiscal 2008.

Management had adopted aggressive cost-cutting measures to align its cost structure with revenue. The company reduced headcount by 90 in the U.S. and by about 30 employees in the UK. It also reorganized the US business unit into integrated vertical teams to concentrate more resources on client issue, deliver stronger insights and create greater value for clients. As a result, Harris achieved annual cost savings of $22 million, of which it plans to reinvest nearly $6 million in fiscal 2010 to support strategic initiatives.

The company’s new CEO had earlier outlined the areas for restructuring its business. Firstly, it will focus on underperforming industries like healthcare. The second area of focus is leveraging technology as Harris plans to use technology to reduce costs, increase speed of turnaround, improve quality and most importantly, to develop new products and services. The company also seeks to focus on international markets and build new revenue streams.

We will wait until we see signs of improvement, which might take several quarters depending upon how domestic and international economies respond. We believe that as a result of the slowdown in recent sales booking trends, the company will have a difficult time going forward.

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