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Sykes gung-ho about expanding in Pacific Rim

While Asia's economic crisis has made many American companies hesitant to expand there, Sykes Enterprises Inc. is throwing caution to the wind.

The Tampa technology-services company is gung-ho about the Pacific Rim this year, checking out prospects in Japan, Singapore and Australia. Sykes is in overdrive to become a global company after making several acquisitions in Europe in 1997.

"Our feeling is this is the right time to go to Asia," John H. Sykes, chairman and chief executive, told shareholders at the company's annual meeting Thursday. "Now's the time you're going to get some good buys in assets purchased there."

His optimism runs counter to feelings of anxiety that have gripped several U.S. companies over the Asian economic decline. Manufacturers are reducing inventory levels because demand has softened in that part of the world.

Dim growth prospects are discouraging companies from making investments in Asia. For instance, Tech Data Corp., one of the Tampa Bay area's largest companies, is shying away from expanding its distribution business in Asia until the economy improves.

Still, Sykes says it's best to strike during times of weakness. He is seeking a partner in Japan and deciding whether Singapore or Sydney, Australia, should be the company's base of operations in the Pacific Rim. Sykes already has a sales office in Singapore and a call center in the Philippines.

The company's European acquisitions last year sparked a huge upswing in international revenues, which increased to $119.2-million from $11.6-million in 1996. (Revenues in 1996 don't reflect the acquisitions.) Sykes now operates nine call centers in Europe and plans to open centers in Poland and Hungary in the third quarter.

The company has built a lucrative outsourcing business by contracting with computer manufacturers and software publishers to provide technical support to end users. The company is looking to expand that niche by helping corporations with their internal computer systems.

Sykes opened an office in South Africa to help banks there. The company recently expanded its corporate help desk in Tampa to about 50 employees, who assist clients such as General Electric Co. and Best Buy Co.

Growth in the call center and help desk businesses is expected to fuel revenue growth of nearly 35 percent in 1998, according to Wall Street estimates. Sykes had revenues of $313.2-million last year.

"These guys execute well," said John Mahoney, an analyst with Raymond James & Associates in St. Petersburg. "But the main issue is, is the industry itself growing fast enough to support the company's growth?"

Sykes thinks the growth is there. That's why he's disappointed with the company's recent stock performance. The stock sells at less than 25 times estimated 1998 earnings of 84 cents a share. "That's unconscionable," Sykes said.

Shares closed Thursday at $20.93}, down 6\ cents.

At the annual meeting, shareholders elected three directors to Sykes' board: H. Parks Helms, a lawyer in North Carolina; Adelaide "Alex" Sink, president of NationsBank Corp.'s private client group; and Linda McClintock-Greco, wife of Tampa Mayor Dick Greco.

McClintock-Greco, a new board member, was chief executive of Tampa General Hospital's managed care plan. She will advise Sykes as it looks for opportunities in the health care field.

Sykes formed a joint venture last year with HealthPlan Services Corp. in Tampa to administer employee benefits for other companies. The joint venture now plans to raise up to $115.1-million in an initial public offering. After the initial public offering, Sykes will own 25 percent of the joint venture.

AT A GLANCE

Sykes Enterprises

HEADQUARTERS: Tampa

EMPLOYEES: 6,500+

BUSINESS: Provides technical support for computer hardware and software via call centers; supports companies' internal computer systems; distributes technology products worldwide; assembles documentation, such as training manuals, for products.

1997 REVENUES: $313-million

1997 NET INCOME: $21.9-million, or 55 cents a diluted share, excluding one-time charges.

TICKER: SYKE (Nasdaq)

STOCK PRICE: $20.93}

52-WEEK RANGE: $16.87{-$32

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