Shares of Conduent Inc. stock (NYSE: CNDT) rebounded slightly Friday following a more than 42 percent drop in share price Thursday.
The drop—from Wednesday’s close of $12.51 to Thursday’s low point of $7.17—followed a less-than-stellar first-quarter earnings report and the resignation of Conduent chief executive Ashok Vemuri. Vemuri had come under fire in April when board member Michael Nevin resigned. Nevin wrote a scathing criticism of Conduent leadership, in particular, Chairman William Parrett and Vemuri, which was filed with the Securities and Exchange Commission April 11.
Nevin had been appointed to the board by activist shareholder Carl Icahn, who last year caused a similar stir when Xerox Corp.—which Conduent was spun out of—was in merger talks with Fujifilm.
In his letter of resignation, Nevin took to task Vemuri’s decision to join the board of Kroger Grocery Stores. Nevin wrote: “Ashok, with Chairman Parrett’s acquiescence, determined to take this board seat only a few short months after negative disclosures by Conduent resulted in the evaporation of almost half the company’s stock market valuation in a matter of weeks. How Bill could have missed or ignored this glaringly obvious red flag is a mystery. The only answer that makes any sense to me is that he was asleep at the switch, as he has been in so many instances during his tenure, or perhaps he was distracted by his myriad other responsibilities as a director of Oracle, Blackstone, Eastman Kodak and UBS Americas.”
For its part, Conduent said the “noisy letter” was Icahn’s attempt at a board takeover in order to replace Parrett.
In the announcement of Vemuri’s resignation, Conduent officials praised his role in transforming the company’s business.
“Under his leadership, the company has implemented a comprehensive cost-reduction program and is continuing to make key investments in technology and products as it pivots to growth,” Parrett said.
A search is underway for Vemuri’s replacement, which Parrett said will focus on identifying a leader “who shares our vision for the power of digital interactions, can accelerate the pace of our progress and deliver enhanced shareholder value.”
“It has been my privilege, as CEO of Xerox Business Service, to separate and then to lead as the first CEO of Conduent,” Vemuri said in a statement. “We have made enormous progress—standing up a public company, driving a significant transformation program in a relatively short period of time, laying the foundation to become a digital interactions company and resolving the legacy issues we inherited.”
Vemuri said he would stay on until his successor is named, likely sometime during the third quarter this year.
In a separate announcement, Conduent released first-quarter revenue of $32 million, compared with $47 million in the first quarter last year. On a per-share basis, earnings were 14 cents, down from 22 cents a year ago. The decline was primarily driven by divested businesses.
Conduent was expected to post a year-over-year decline in sales; Zacks Investment Research expected quarterly earnings of 19 cents per share, a nearly 14 percent decline. Revenues were expected to be $1.18 billion, down 17.2 percent from the year-ago quarter.
Conduent provides business process services with capabilities in transaction-intensive processing, analytics and automation in the U.S. and Europe. It operates through three segments: Commercial Industries, Government Services and Transportation.
The company is headquartered in Florham Park, N.J., and has a call center that employs more than 600 at the former Medley Centre in Irondequoit. At a ceremonial ribbon cutting for the center in early 2018, Conduent’s chief people officer Jeff Friedel said the company had planned to add another 350 employees before year’s end.