SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
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[ ] Soliciting Material Pursuant to Section 240.14a-12
COTELLIGENT, INC.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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100 THEORY SUITE 200 IRVINE, CA 92612
TEL 949.823.1600 FAX 949.823.3300 WWW.COTELLIGENT.COM
[COTELLIGENT LOGO]
June 30, 2003
VOTE YOUR WHITE PROXY CARD TODAY!
DEAR COTELLIGENT STOCKHOLDER:
Today I received a letter from a concerned Cotelligent stockholder. This
stockholder has held our stock for several years and has seen your Company
decline during the most difficult and challenging period for the information
technology industry in memory. In the letter I was asked questions and was
invited to call the stockholder at my earliest convenience.
I returned the call and we had a lengthy conversation. We both benefited
from having the chance to hear one another's concerns, considerations, ideas and
expectations. Moreover, during the course of the call, we established a
communication that marks the beginning of, what I feel will be, a closer
relationship between this stockholder and your Company.
After I hung up the phone, I realized that stockholders may not have a solid
understanding of what we have accomplished and what the future holds for us. So,
I decided to put some of our conversation in writing.
Here are the issues I discussed on the phone with this stockholder the other
day:
COMMENT:
'COTELLIGENT CONTINUES TO LOSE MONEY AND ACCORDING TO MY CALCULATION WILL BE OUT
OF BUSINESS IN A YEAR'
Cotelligent will not be out of business in a year. Like so many other
businesses in our sector, Cotelligent has survived the most significant downturn
in technology spending and has every reason to be optimistic about the future.
Keep in mind, most of Cotelligent's drop in revenue since 2000 was also
strategic as we got out of business lines that did not make sense going forward.
Our financial performance by any measure has been disappointing, but we have
always been careful as we worked at changing the face of the Company to preserve
our most valued asset, our cash. We have been mindful all the way with one goal
in mind . . . to be there at the finish line when things begin to turn.
To prove this point, here are some examples of what we have done over the
past few years to make certain we continue to stay in business:
We have improved the profitability of our client engagements as
evidenced by increases in our gross margins from 25% to over 40%;
Through careful restructurings we have reduced headcount and closed
non-performing facilities. SG&A in our most recent quarter was 65% of
what it is was a couple years ago;
We continue to look at creative ways of producing more efficiencies,
such as the more recent moves of our San Francisco headquarters and
accounting center to excess space at our operating location in Irvine,
California; and
We continue to have high SG&A compared to today's revenue, but it's
important to understand that 54% of our non-billable staff are in
sales, marketing, delivery of client services, research and
development. These expenses are growth oriented and are essential to
keeping your Company positioned for the future.
COMMENT:
'WHY ARE YOU SO OPTIMISTIC ABOUT THE FUTURE?'
We have several reasons to be optimistic about the future. We will return to
a period of sustainable and predictable growth because of the changing landscape
in which we operate. Consider this:
Six months ago, Cotelligent put in place a formal marketing program for
the first time in its 7 year history. This well defined, targeted,
outreach program has begun to show tangible results such as a)
increased number of meetings with prospective clients, b) increased
demand for written proposals, c) increased opportunity with clients who
are more focused on the services we specialize in, d) increased size of
opportunity and e) closer and direct interaction with business partners
(e.g., IBM, Microsoft, Toshiba) which introduce us to direct sales
opportunities.
Cotelligent's merger and acquisition strategy is proceeding and showing
positive signs.
In a recent report, Gartner Dataquest, a major analyst firm, predicted
that the software industry would return to positive stabilized growth
in 2003(1). Further, industry analyst firm IDC predicted that if the
war in Iraq was short and regional economies strengthened, worldwide IT
spending would pick up and return to positive growth in 2003(2). These
predictions are consistent with the findings of a monthly survey of
corporate chief information officers which reported that companies are
expected to increase spending on software, high-tech equipment and
services this year(3).
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(1) (Sharon Gaudin, Gartner Predicts Upturn in Software Sales,
www.internetnews.com, March 17, 2003.) Permission to use quotes was neither
sought nor received.
(2) (Sharon Gaudin, IDC: War Affects IT Spending Growth, www.cioupdate.com,
April 3, 2003.) Permission to use quotes was neither sought nor received.
(3) (Survey: Brighter outlook for tech spending, Sacramento Business Journal
www.bizjournals.com, February 3, 2003.) Permission to use quotes was neither
sought nor received.
Historically, Cotelligent reported earnings results that met or
exceeded analyst's expectations for roughly 11 of 12 consecutive
quarters before the market for IT services fell off. Therefore, with
the right economic conditions, which we see coming back into play,
coupled with our marketing efforts, one would logically conclude that
we will experience 'sustainable and predictable growth' going forward.
COMMENT:
'YOU CHANGED AUDITORS AND DELAYED YOUR PUBLIC FILINGS. G&G SAYS YOU DO NOT CARE
ABOUT THE QUALITY OR TIMELINESS OF YOUR FINANCIAL INFORMATION'
Cotelligent has always cared about the timeliness and quality of its
financial reporting and information.
Last spring, we changed auditors from Arthur Andersen to KPMG (another
national accounting firm) because Arthur Andersen went out of business. KPMG
began their first audit engagement with your Company in August 2002. With little
to no information forthcoming from what remained of Arthur Andersen, we decided,
in the interest of complete and accurate financial reporting, that we should
audit prior years in addition to reviewing the current period -- this resulted
in a delay in SEC filings. The work our auditors conducted took an extended
period of time to complete and as soon as their work was finished, we brought
our filings up to date.
We had never delayed our filings in the past and we are back on track. We do
not expect these unusual circumstances to repeat themselves in the future.
COMMENT:
'WHY ARE THERE SO FEW BOARD MEMBERS? IS THERE A PLAN TO INCREASE THE SIZE OF THE
BOARD OF DIRECTORS?'
The Board of Directors has decreased in size, somewhat in line with the
reduction to the size of the Company which is now around 150 employees.
Recognizing we are now in the process of growing again, we have been actively
interviewing director candidates and are working to bring experienced and
qualified outside directors to Cotelligent.
We have even met with Richard Green, and do not feel he is qualified to sit
on the Cotelligent Board of Directors because 1) he has never served as a
director of a public company before and does not have experience in matters of
corporate governance, 2) he has no experience in the technology sector, 3) he
has no expertise in the wireless, mobile, internet and related business, which
is precisely the direction Cotelligent is going, and 4) his experience is in
areas of business which are non-related and not helpful to the representation of
Cotelligent stockholders.
WE MET WITH RICHARD GREEN SEVERAL TIMES, EACH TIME ASKING FOR HIS PLAN AND
IDEAS FOR IMPROVING YOUR COMPANY. HE NEVER PRESENTED A PLAN AND NEVER SHARED A
SINGLE IDEA FOR HELPING BUILD THE VALUE OF COTELLIGENT.
Just one more point about G&G. In their Proxy Statement, they indicate
Cotelligent was unresponsive when they made their 'hostile' offer to acquire
your Company in November 2002. Factually, the letter I sent them acknowledging
their offer and your Board's consideration of the matter was returned to me by
mail 'RETURNED TO SENDER' two weeks after I mailed it. As stockholders, I think
we should be very suspicious about who G&G is and what they're really up to.
DO NOT PERMIT G&G TO UNDERMINE YOUR COMPANY'S FUTURE
As I mentioned, I believe personal communication to be very important
especially in matters as important as these. I would both appreciate and value
the opportunity to speak with you regarding your Company and why you should have
confidence in my leadership in the days, months and years ahead. My telephone
number is (949) 823-1600. VOTE YOUR WHITE PROXY CARD TODAY.
FOR MORE INFORMATION, PLEASE CALL OUR PROXY SOLICITORS, MACKENZIE PARTNERS,
TOLL-FREE AT (800) 322-2885 OR COLLECT AT (212) 929-5500. THANK YOUR FOR YOUR
CONTINUED SUPPORT.
Sincerely,
/s/ James R. Lavelle
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James R. Lavelle
Chairman and CEO
SAFE HARBOR STATEMENT
Except for historical information contained herein, the information
contained in this letter includes forward-looking statements that involve
certain risks and uncertainties that could cause actual results to differ
materially from such statements. All forward-looking statements included in this
letter are based upon information available to Cotelligent as of the date
hereof, and Cotelligent assumes no obligation to update any such forward-looking
statements. Please refer to the discussion of risk factors and other factors
included in Cotelligent's most recent Report on Form 10-Q, Report on Form 10-K
for the year ended December 31, 2002, and other filings made with the Securities
and Exchange Commission.