- The Washington Times - Monday, December 24, 2001

Cysive Inc., a Reston software company, hopes that by giving itself a new business plan and a leaner work force, it can turn around the dismal year it's had.
Cysive, when it started out in 1993, was a software consulting firm, and built electronic-commerce systems for clients such as First Union Banks and Cisco Systems. Then in October, Cysive offered its own business software creation, called Cymbio.
But the company, which first laid off approximately 15 percent of its work force last December, laid off more workers 39 to be exact, or about 23 percent of its work force Dec. 13, as demand for its consulting and computer software services went down.
"Our approach is to put ourselves in the best possible position. We always do what we think is right at the time," says Cysive CEO and president, Nelson Carbonell.
Cysive says the latest cutbacks will help the company save more than $40 million. But George Price, an analyst with Legg Mason Wood Walker in Baltimore says layoffs alone will not help the company rebound.
"Cutting jobs is a symptom of a problem, not a cure," he says. "It's a symptom of the fact that demand is so weak for the products Cysive produces."
Most computer companies, whether they specialize in software, hardware, or in consulting, have seen their profits tumble as a result of the sluggish economy. But Mr. Price says it's the smaller companies that focus on Web-based technologies, such as Cysive, that have been hit the hardest.
"I have talked with many management teams, and the older ones are saying they haven't seen this kind of difficult environment," Mr. Price says.
Whether their foray into computer software will turn them around remains to be seen, says Christopher Penny, an analyst with Friedman Billings Ramsey in Arlington.
"The stock's price is representative of the investors' discounted faith in the ability the company has to transition itself," Mr. Penny says. "If they succeed, we perceive there'll be a nice appreciation in the stock price."
Cysive's 52-week high of $7.50 came on Jan. 30, and dipped to its 52-week low of $1.93 on Aug. 23. The stock closed at $2.90 Friday.
Both Mr. Penny and Mr. Price have "market perform" ratings on the stock, which translates into "proceed with caution." Mr. Penny says the company needs to address some of its "internal issues" before his company will consider revising its stock rating. Currently, his company thinks the "risk-reward relationship" at Cysive is neutral, as the stock has been trading below its cash value of $4.
"This is a really hard transition to make, and not many companies have gone this route," he says. "They're small enough to probably be successful, but there's a certain amount of risk involved."
Mr. Penny gives credit to Cysive's management for protecting its capital base while undergoing the transition.
Mr. Carbonell says he feels optimistic about the company's new direction.
"We had lots of experience building e-commerce systems, and our consulting company didn't look to be getting the best return for our investors, and we then decided to announce the repositioning of our business," Mr. Carbonell says.
But he also concedes his company's transition is unorthodox.
"There clearly are precedents for service companies becoming software companies," he says, naming companies such as Oracle and ATG. "But it's not a real frequent thing [within the industry] that we did."

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