Belt-tightening at Sapient

Company to reduce staff, increase Indian operations

Cambridge, MA  July 2, 2001  Business and technology consultancy Sapient reported today that it is intensifying efforts to expand its global distributed delivery model and drive efficiencies throughout its operations. To achieve these objectives, Sapient is reducing its headcount by approximately 390 people, or roughly 14 percent, and plans to substantially increase its operations in India. Nearly all of the reductions will be in North America, where the company will also be consolidating office space in some cities. Additionally, the company announced its intention to exit the game development business.

"The challenges of the economic environment are obvious, but what might be missed is the long term, underlying shift in what clients expect and need from their business partners," said Jerry Greenberg, Sapient's co-chairman and co-CEO. "We believe we are uniquely positioned to deliver high-value business and technology solutions, rapidly and cost-effectively, using a global distributed delivery model. The actions we are taking today will move us towards the balance we need in order to achieve our strategy. However, we certainly wish that the environment were stronger so that we could have accomplished this balance without having to let great people go."

To further the development of its Indian operations, Sapient will relocate approximately 60 of its experienced consultants to the New Delhi office and expand its hiring and recruitment efforts in India. "Global distributed delivery, combined with our expertise in business strategy and user experience, has been a competitive advantage for us and our clients over the past year," said Sheeroy Desai, Sapient's chief operations officer. "Our New Delhi operation already comprises more than 250 people, and we have successfully utilized our talent there to help deliver a number of key client engagements."

Sapient will take a restructuring charge of approximately $50 million, most of which will be incurred in the third quarter of 2001. The charge will consist of severance and related expenses from the reduction in workforce, and other costs related to office space consolidations. The company expects cost savings from these actions of approximately $13 million in the third quarter, and $60 million on an annualized basis.

Sapient expects second quarter 2001 revenues of approximately $87 million and a pro forma loss per diluted share (which excludes amortization of intangibles, acquisition costs, stock-based compensation charges, and restructuring costs) of $0.07 per share, compared to consensus estimates of $90 million in revenues and a pro forma loss of $0.06 per share. The company anticipates that its cash position at the end of the second quarter will remain above $250 million. The company did not give guidance for future periods.