By Mike Boyer
The Cincinnati Enquirer

James Orr (right), chief executive officer of Convergys Corp., and Bill Hawkins, the company's general counsel, leave Cincinnati City Hall on Tuesday after a meeting with Mayor Charlie Luken. (Gary Landers photo) | ZOOM |

Convergys Corp. is in the business of saving other big corporations money, which puts intense pressure on it to keep its own costs down.

That's the key reason the company is seeking tax concessions from Cincinnati, industry analysts say.

"They have a very tough time keeping costs down, because the companies they provide services to already have economies of scale," said Lawrence Berlin, who tracks the Cincinnati-based company for First Analyst Securities in Chicago.

In seeking a $200 million-plus package of incentives from the state of Ohio and the city to consolidate billing and customer care operations downtown, Convergys cited cost savings that would result, said Councilman Chris Monzel.

Second thoughts about $33 million in job-retention credits in the city's $63.4 million package triggered Tuesday's decision to cancel a council vote on the package and attempts to renegotiate the deal.

ABOUT CONVERGYS

What it does: The company is a leading provider of billing services and customer and employee care for global corporations. Every day, it processes 1.5 million customer bills and handles about 1.7 million customer calls for its clients, which include AT&T, AOL Time Warner, Comcast, DirecTV and Bristol-Myers. Financials: Net income last year of $146 million, or 88 cents a share, after restructuring charges, on revenues of $2.3 billion. Employees: 44,000 worldwide, including about 1,900 in Greater Cincinnati. History: Made initial public stock offering at $15 a share in 1998. The company was created from Cincinnati Bell Inc.'s former Matrixx Marketing and Cincinnati Bell Information Systems businesses. Civic ties: Convergys and Cincinnati Bell made a $1 million contribution to the National Underground Railroad Freedom Center in 1998. Convergys sponsors such local arts groups as the Cincinnati Opera and Playhouse in the Park. National stature: The company (pronounced CON-ver-gis) has been named to Fortune magazine's annual list of most admired companies for the last three years. It also is on the Calvert Social Index, a group of the nation's 600 most socially responsible companies. Stock price: $16.35, down 27 cents Tuesday. Its shares, sold under the symbol CVG, are traded on the New York Stock Exchange.

STOCK CHART

• Convergys' stock path mirrors other tech stocks

Although the company wasn't specific, Monzel said Convergys made it clear it expects to save by not having four separate area offices. Company spokeswoman Renea Morris said she had no data on what the company expects to save by consolidating about 1,900 jobs in one location. But she said improvements in efficiency and communications are as important as cost savings.

In early 2000, Convergys opened a new 171,000-square-foot building in a suburban Orlando, Fla., office campus where it already had two other facilities. The three-story building allowed Convergys to combine three smaller call centers in Orlando and expand its data management center.

Tougher going

After four years of double-digit growth following its spinoff from Cincinnati Bell Inc. in 1998, Convergys has faced much tougher going over the last year.

In December, it announced a $108 million cost-cutting effort that included plans to eliminate some offices and trim about 1,000 jobs worldwide this year.

Last month, Convergys said it was helping one of its largest billing clients, Sprint PCS, establish its own in-house billing system. And last week, Reuters news service reported that AT&T Wireless, also one of Convergys' largest customers, was evaluating its billing agreement as part of an overall review of costs.

Analysts said they expected the AT&T review wouldn't result in Convergys losing its business, but would put pressure on the company to reduce prices.

Analyst Berlin said while Convergys' customer care business has been healthy, its billing operations, which last year represented about 39 percent of total revenues, have been under increased pressure from rivals such as Israel-based Amdocs Ltd.

Takeover target?

A recent flurry of acquisitions among technology stocks prompted Forbes.com last week to compile a list of possible takeover candidates, which included Convergys.

But Berlin and Michael Latimore, an analyst who follows the company for Raymond James & Associates in Atlanta, said they think Convergys is more likely to be an acquirer because of its size and healthy balance sheet.

Berlin thinks Convergys would be better served selling its billing business to invest in its small but faster-growing employee care business. As far as Convergys being a takeover target, "I don't see it," he said.

Convergys is already the largest provider in the customer-care market, and rival Amdocs doesn't need to acquire the billing operations to expand its business, Berlin said.

E-mail mboyer@enquirer.com