After Rocky Year, New Black Box CEO Takes Aim At Turnaround

After a rough year that saw four consecutive quarters of falling revenues, a bumpy sales force restructuring and a change in the corner office, the new CEO of Black Box said he is optimistic about the company's future.

"It will not be an easy path and there are some difficult decisions ahead," E.C. Sykes said told analysts Tuesday after the release of the company’s revenue and earnings figures for its 2016 fiscal year. "But all the elements [we need to succeed] are here."

Sykes said the solution provider's difficulty with its sales force restructuring - which began 14 months ago and resulted in the replacement of 30 percent of the sales staff - did not surprise him. He added that, in his experience, such a large shakeup of a sales force takes between 18 and 24 months to see the transformation.

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"I'm not surprised we had difficulties," he said. "But I think it is positive that the clock has been ticking through the whole time."

In 2015, Black Box’s stock price reached an all-time low, trading at $6.84 per share following the resignation of former CEO Michael McAndrew in December, and the sales force restructuring.

For its 2016 fiscal year, which ended March 31, sales fell 8 percent compared to last year, landing at $912 million.

Moving forward, the Lawrence, Pa.-based IT solution provider – No. 34 on CRN’s Solution Provider 500 list - will continue the transformation it started in its sales force and commercial services business over the last year.

Following that, Sykes said, Black Box will continue to remake itself with three additional transformational goals he called phases, adding they were part of a plan to make the company more "agile, innovative, effective and efficient."

Sykes called the three new phases of the plan "essential steps needed to create the organization we need moving forward."

"These efforts ... are exactly the right things to do," he said.

In the expanded plan, Sykes said the ongoing restructuring will "reset the business model" and prepare the company for the next steps he plans to take.

He said that, moving forward, the company will look to increase its focus on growing markets and retreat from those that are declining, moves that will be followed by an expansion into faster-growing markets close to those in which the company currently does business.

Sykes said he hopes that movement will allow the company to become more agile in adjusting to technology shifts and reaching sustainable growth in new markets. But he said Black Box has a long way to go before it reaches that point.

However, he said he’s optimistic now that the "hard times," are behind the company.

Sykes announced Black Box will stop providing guidance due to the fact that it has it could not rely on its predictions throughout its restructuring process.

"If you have been following the company for some time, it will not come as a surprise when I tell you that the company has not been able to accurately provide financial guidance on a consistent basis," he said.

In fact, in each quarter of its 2016 fiscal year, the company had to adjust its year-end revenue guidance, moving the range downward over the four quarters. "In the normal course of business, this is unacceptable," Sykes said, adding that the company will provide guidance when it "vastly’ improves its ability to predict business consistently.

Black Box also reported an 8-percent drop in revenue for the fourth quarter over the same quarter in 2015, bringing in $224.1 million.

Meanwhile, the company lost $4.7 million. For the entire fiscal year, Black Box lost $171.1 million, down substantially from $15 million in fiscal 2015.

On Wednesday, the day after the company's earnings report, Black Box stock fell nearly 11 percent, or $1.53, from $14.11 to $12.58.