Convergys Corp. is headquartered in Cincinnati. But after selling two of its three operating divisions in the past couple of years, the company’s roots are now planted in a business that started in Jacksonville nearly three decades ago and was a significant player in the city’s corporate history.
Convergys’ remaining business is its customer management division, which provides outsourced customer service functions for other companies. A good chunk of the customer management division grew out of a Jacksonville company called AT&T American Transtech.
Transtech is long gone, but it shouldn’t be forgotten.
Transtech opened in 1983 to handle shareholder services for the court-ordered breakup of AT&T. For those of you not old enough to remember a time when we had no choice in telephone services, AT&T was a monopoly that operated the entire U.S. phone system. A federal antitrust lawsuit led to a forced breakup of the corporation into seven regional phone companies.
It was such as massive undertaking that AT&T formed a new business called Transtech with 1,300 employees to handle the task of divvying up shares of the seven new companies to AT&T stockholders.
It was a major coup for the city when Gov. Bob Graham and Mayor Jake Godbold announced at a September 1982 City Hall news conference that AT&T had decided to put Transtech in Jacksonville.
The formation of Transtech opened the eyes of corporate America to what Jacksonville had to offer for back-office operations, and several major companies opened operations centers that employ thousands of local workers today. That includes Citigroup Inc.’s credit-card center that started as the credit-card business of AT&T.
Besides providing jobs, Transtech also sprouted a wave of development of business parks that transformed areas of Jacksonville’s Southside, such as the Baymeadows and Deerwood Park neighborhoods.
As other companies came to Jacksonville in the 1980s and 1990s and began growing, Transtech also expanded. The task of handling AT&T’s breakup obviously had a limited timeframe, but the company was able to leverage its infrastructure to develop the outsourced call center business. It grew to 4,700 employees in Jacksonville and had more than 4,000 additional employees working in nine other cities by 1997, when it was renamed AT&T Solutions Customer Care.
But in early 1998, AT&T sold the business to Cincinnati Bell Inc. for $625 million (shortly after it sold its credit-card business to Citigroup). Cincinnati Bell had a customer service division called Matrixx Marketing, and the addition of the AT&T business doubled the size of Matrixx.
Later in 1998, Cincinnati Bell spun off Matrixx and another division that provided customer services for the wireless communications market into a new public company called Convergys.
Convergys announced on March 22 that it is selling the other division, called information management, to NEC Corp. for $449 million. That leaves the company with only its customer management division, the one that grew out of Transtech.
Customer management is the core for Convergys
The sale of Convergys’ information management division completes a “cleanup” of the company over the past couple of years, according to Robert W. Baird analyst David Koning.
“Since Jeff Fox took over as CEO two years ago, he has sold three large non-core assets and has tightened the focus on core customer management,” Koning said in a research note.
Besides agreeing to sell the information management division, Convergys sold off another division that provided human resources management services to NorthgateArinso in 2010.
The third non-core asset was an interest in joint ventures that invested in cellular communications businesses. Convergys divested that last year.
The customer management business has been by far the company’s biggest business, producing $1.9 billion in revenue last year. The business has been down recently, but Koning is looking for improvement.
“Revenue growth has been negative, given weak existing client volumes,” he said, but he added that revenue growth could begin to accelerate this year.
Stifel Nicolaus analyst Shlomo Rosenbaum said in a research note that Convergys is receiving a better price than he expected for the information management business. But he downgraded the company’s stock from “buy” to “hold” after the sale announcement.
“While we believe the bias to the stock is upward from operational improvements, we don’t see enough near-term upside potential to continue to recommend the shares. Also, we are unwilling to argue that the sector as a whole is undervalued,” he wrote.
Rosenbaum expects Convergys to use the cash from the sale for share repurchases and “selective acquisitions.”
UPS buying TNT
Speaking of local business history, rumors were rampant six years ago that United Parcel Service Inc. was trying to buy the logistics unit of Netherlands-based TNT NV, which included a North American division based in Jacksonville.
Instead, the logistics business was sold to private equity firm Apollo Management, which renamed it CEVA Logistics.
But UPS didn’t forget about TNT. Two weeks ago, UPS announced an agreement to buy the company now known as TNT Express NV for $6.8 billion.
Atlanta-based UPS, which is a major employer in Jacksonville, said the acquisition of Europe’s second-largest package delivery company will expand its presence in Europe and “create a global leader in the logistics industry” with more than $60 billion in annual revenue.
TNT had three businesses in 2006: logistics, package delivery and a third unit that delivered mail in the Netherlands.
After selling the logistics division six years ago, it split its remaining two businesses into separate companies, with the mail delivery company renamed PostNL.
The merger agreement with UPS came after several weeks of negotiations and rumors of other bidders. The companies said the agreement could be terminated if another party comes in with an offer that is at least 8 percent higher than UPS’ purchase price.
Misys has a buyer
One more note about international mergers and Jacksonville business history: Last June, Jacksonville-based Fidelity National Information Services Inc. said it was considering a bid to buy British bank software firm Misys PLC.
Fidelity eventually ended negotiations in August when it couldn’t come to an agreement on a price, which analysts speculated would be more than $2 billion.
Misys has been the subject of merger rumors ever since and two weeks ago, it agreed to $2.1 billion buyout offer from Vista Equity Partners.
That doesn’t necessarily mean that the Misys saga is over. Bloomberg News reported that the $2.1 billion price is considered by some to be too cheap, and there is speculation that a higher offer will come in.
Global Axcess turns around in 2011
After losing money in 2010, Global Axcess Corp. turned business around last year.
The Jacksonville-based company, which operates automated teller machine and DVD rental kiosk networks, last week reported a net loss of $1.9 million, or 8 cents a share, for 2011. But Global Axcess said excluding non-cash impairment and restructuring charges, the company would have recorded a net profit of $255,000.
Revenue for the year rose 40 percent to $31.9 million.
“We are now well-positioned to focus on our strategy of profitable growth, which includes pursuing accretive ATM portfolio acquisitions and aggressive ATM branding. That, combined with our persistent focus on expense reductions and productivity improvements last year, should lead to increased profitability in 2012 and beyond,” interim CEO Lock Ireland said in a news release.
Global Axcess projected 2012 revenue to be $35 million and adjusted earnings before interest, taxes, depreciation and amortization of $5.5 million, up from $4.7 million last year.
ParkerVision regains Nasdaq compliance
ParkerVision Inc. last week said it has been notified by Nasdaq that it has regained compliance with Nasdaq’s listing requirements regarding minimum prices of its stock.
ParkerVision’s stock was trading below $1 when it was notified in November that it could lose its listing. But the stock has closed at $1 or above every day since March 9.
Jacksonville-based ParkerVision, which is developing wireless radio technology and had no revenue last year, on Friday reported a net loss of $3.9 million, or 6 cents a share, for the fourth quarter. It lost $14.6 million, or 24 cents a share, for all of 2011.
Foley gives up role as Fidelity chairman
Fidelity National Information Services Inc. announced Monday that Bill Foley has given up his role as chairman of the board to devote time to other business interests. Foley will stay on the board of directors as vice chairman.
Frank Martire, who had been president and CEO, now becomes chairman and CEO. Executive Vice President Gary Norcross was promoted to president and chief operating officer.
Foley remains executive chairman of Fidelity National Financial Inc., which spun off Fidelity National Information as a separate company.
“Frank and Gary have done a terrific job driving performance and executing our business strategy. These appointments, which advance the company’s succession planning, also reflect the depth and strength of our leadership team and our ability to promote from within,” Foley said in a news release.
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