GTSI Corp.'s stock plummeted 30 percent yesterday after the Chantilly government contractor warned Wall Street that it would report a loss during the first quarter because the prospect of a war in Iraq and the delayed fiscal 2003 budget forced some customers to put off spending plans.
Civilian federal agencies, whose purchases make up about half of GTSI's revenue, delayed spending plans during the quarter while they waited for Congress to pass the budget, company officials said. The possibility of a war in Iraq is causing other agencies to reevaluate spending plans and put off projects to conserve cash, GTSI said.
While GTSI, which mostly works as a intermediary between computer makers and federal agencies, has seen an increase in demand for some products, such as rugged laptop computers that can be used on a battlefield, that has not been enough to offset the general slowdown, said M. Dendy Young, chairman and chief executive.
The company's stock fell $2.50 a share, or 30.5 percent, to $5.70, on the Nasdaq Stock Market.
GTSI initially predicted that it would break even during the quarter, which still would have been a decline from the first quarter of 2002, when it reported a profit of $541,000 (6 cents per share). Revenue in the first quarter of this year will be flat compared with the $176.7 million the firm reported during the same period last year, according to a company statement. The first quarter ends March 31.
The company still expects to be profitable for the year, Young said. "I am very high on the prospects of the company. I think this is just a timing issue," he said.
GTSI has labored to shed its image of being a computer reseller, a low-margin business compared with the more profitable, service-oriented field of systems integration. It is also attempting to grow in the state and local markets.
But neither step is likely to help profits in the near term, said Brian Kinstlinger, an analyst at research firm Sidoti & Co. Systems integration is "a long-term driver of growth," but in the near term it "doesn't impact them much," Kinstlinger said. At present it accounts for less than 1 percent of GTSI's business, he said.