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EXHIBIT 99.1
[BREAKAWAY LOGO] CONTACT
PRESS: INVESTOR:
JOANNA BOLLES TIM PERKINS
PUBLIC RELATIONS INVESTOR RELATIONS
BREAKAWAY SOLUTIONS BREAKAWAY SOLUTIONS
617-275-3430 617-275-3579
[email protected] [email protected]
BREAKAWAY SOLUTIONS COMMENTS ON FOURTH QUARTER OUTLOOK
BOSTON, MA -December 28, 2000 - Breakaway Solutions, Inc. (NASDAQ: BWAY), the #1
Global Full Service Provider (FSP) of ebusiness solutions offering integrated
strategy, implementation and application hosting to Global 3000 collaborative
ebusiness enterprises, reported today that it expects its financial results for
the fourth quarter ending December 31, 2000 to be lower than the consensus of
published analysts' expectations.
Breakaway Solutions expects its revenues for 2000 to be in a range of
approximately $118 million to $119 million on a pro forma basis, as compared to
$39 million for 1999, an increase of approximately 300%. The Company anticipates
that its fourth quarter revenues for 2000 will be in a range of approximately
$22.5 million to $24 million, an increase of approximately 65% from revenues for
the fourth quarter of 1999. Application Hosting revenues are expected to total
approximately $8.5 million in the fourth quarter of 2000, an increase of
approximately 550% from hosting revenues for the fourth quarter of 1999. The
Company anticipates its Application Hosting revenues for the fourth quarter of
2000 will represent 35% of its total revenue, compared to 22% for the third
quarter of 2000.
Cash loss (net income excluding goodwill, amortization, increase in bad debt
reserves, one-time restructuring, and one-time integration costs) for the fourth
quarter of 2000 is expected to be between approximately ($0.26) to ($0.28) per
fully diluted weighted average share of common stock and outstanding options.
All of the figures presented are subject to completion of the Company's upcoming
annual audit, and exclude restructuring charges, charges for increased bad debt
reserves, and other one-time charges.
The Company attributes the revenue and earnings shortfall to a sharp decline in
business from Internet Capital Group companies, the continuing change in the
market environment, and a shift in the Company's focus away from servicing dot
com customers and toward engagements with brick-and-mortar collaborative
ebusinesses, Global 3000 companies and autonomous divisions of Global 500
companies.
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The Company has also announced further reductions in its staff, increasing its
previously announced workforce reduction from 10% to 30% of its total workforce.
The Company has also taken measures to reduce its general and administrative
costs. The savings from these measures will total approximately $10 million per
quarter, beginning with the first quarter of 2001.
In light of the market changes, the Company has also announced its intent to
allow employees to exchange their stock and stock options for either restricted
stock or new options to be granted six months after the date of the exchange.
"Like many in our sector, Breakaway Solutions has felt the impact of a changing
marketplace, particularly a shift away from a reliance on dot com revenues.
Unfortunately, these market changes have combined with Internet Capital Group's
reduction of its investments in its affiliate companies to make this quarter
particularly challenging," said Gordon Brooks, president and CEO of Breakaway
Solutions. "The good news is we expect ICG affiliated and venture-backed dot com
revenues to continue to substantially diminish as a percentage of our total
revenues in the first quarter of 2001."
"We strongly believe that our experience, unique business model and ability to
deliver value for larger, collaborative enterprises positions us well for future
growth," Mr. Brooks continued. "We have put into place the cost-cutting measures
that will help us in the short term. More importantly, however, we are seeing an
increase in demand for our services from established companies such as Fuji and
Motorola, and our backlog stands at more than $17 million for the first quarter
of 2001. We are comfortable with our backlog and visibility and expect
sequential quarterly growth in the first quarter of 2001. This demonstrates the
magnetism of our Full Service Provider business model."
Highlights of the quarter included:
- 22% of the Company's revenues are anticipated to be from its largest
five customers as compared to 31% in the third quarter of 2000. o
Recent Global 3000 customer wins such as Fuji, Motorola, Strong Capital
Management, and MIT Technology Review. o The addition of 23 new
Application Hosting customers in the fourth quarter 2000.
- The increase in attraction to Breakaway's Managed Services offering
with the addition of 16 customers such as Anadys Pharmaceuticals,
Emerge, Massachusetts Health Data Consortium, and OnMoney.
- Revenues from Internet Capital Group and its affiliated companies fell
to approximately $4.6 million for the fourth quarter 2000, 67% less
than in the third quarter of 2000. Further, ICG and its affiliated
company revenues for the month of December are expected to be
approximately $825,000, including engagements from such established
businesses as RightWorks and VerticalNet.
- Revenues from venture-backed dot com companies are expected to be
approximately $3.4 million in the fourth quarter of 2000, 48% less than
in the third quarter of 2000. Venture-backed dot com revenues declined
to approximately $740,000 for the month of December.
- Breakaway Solutions has continued to build and strengthen its sales
organization to 75 professionals, an increase from 66 in the third
quarter of 2000.
- Breakaway Solutions has continued to strengthen partner and alliance
relations including the participation with Microsoft's coalition of
business and technology leaders spearheading the Universal Description,
Discovery and Integration (UDDI) project designed to accelerate and
broaden business-to-business (B2B) integration and commerce on the
Internet.
- Expanded storage capabilities and created a new practice called Storage
Solutions Services to focus on the delivery of complex storage
infrastructure solutions that includes secure and distributed SAN, NAS
and Media storage.
The Company is scheduled to report final results for 2000 on the evening of
February 16, 2001, and will be prepared to comment on 2001 revenue and earnings
projections at that time. The call can also be accessed via the Breakaway
Solutions corporate Web site at WWW.BREAKAWAY.COM and at WWW.VCALL.COM. ABOUT
BREAKAWAY SOLUTIONS Breakaway Solutions, Inc. (Nasdaq: BWAY - NEWS) is the #1
Global Full Service Provider (FSP) of e-business solutions specializing in
defining, creating, and operating sustainable digital businesses for Global 3000
collaborative enterprises through strategy, e- business implementation, and
application hosting services. Headquartered in Boston, Mass., Breakaway
Solutions has a network of regional offices and Internet Solutions Centers in
major cities across the U.S. and in Europe, as well as 11 Application Hosting
facilities in North America, Europe, Asia and Australia. Breakaway Solutions can
be reached at 617/275-3000 or at www.breakaway.com.
Except for the historical information contained in this announcement, the
matters discussed in this announcement are "forward-looking statements" (as that
term is used in the Private Securities Litigation Reform Act of 1995) that
involve risks and uncertainties, including risks relating to the attractiveness
of Breakaway's Full Service Provider model to its current and prospective
customers, likely variations in quarterly revenues and operating results, the
ability to realize benefits from acquisitions and strategic alliances, risks in
conducting business outside the United States, the adoption and acceptance of
application hosting services by growing enterprises, personnel and customer
retention, ability to raise additional capital, equity dilution, business
change, product acceptance and customer demand, variation in quarterly results,
competition, and growth management detailed from time-to-time in Breakaway
Solutions, Inc.'s filings with the Securities and Exchange Commission. Breakaway
Solutions, Inc. draws the reader's attention to the factors described in its
Quarterly Report on Form 10-Q for the Period Ended September 30, 2000 under the
heading "Factors That May Affect Future Results." Any such forward-looking
statements speak only as of the date such statements are made, and the company
undertakes no obligation to publicly release the results of any revision to
these forward-looking statements or otherwise update or supplement this
announcement or the risk factors contained in its filings with the Securities
and Exchange Commission.
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