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CTG'S EARNINGS TO MISS TARGETS AS FIRMS FREEZE COMPUTER SPENDING

A Year 2000 chill on computer-related spending will prevent Computer Task Group Inc. from meeting analysts' profit targets, the Buffalo-based technology consultant announced Monday.

The news sent CTG's stock down $1.43 3/4 on the New York Stock Exchange to $15.37 1/2 . The shares touched a new 52-week low of $14 3/4 during the day, but rebounded somewhat before the close.

Corporations are waiting until after the feared Y2K date to invest in new computer systems and applications, CTG officials said, and Y2K-related repair work is ending as well.

"Unfortunately, we cannot hold off investing until the year 2000," CTG chairman and CEO Gale S. Fitzgerald said.

The company is training employees in electronic commerce, health care info-tech and other technology areas that will drive its business after Jan. 1, Ms. Fitzgerald said. CTG runs computer systems for corporate clients.

CTG said it expects sales to be "slightly higher" than last year's $467.8 million, a shock in an industry used to growth rates of 20 percent or more.

Profits will be about $1.04 to $1.08 per share vs. last year's $1.42, the company said. Industry analysts had expected $1.50 in per-share profits, according to Boston-based research firm First Call.

For the third quarter, consensus estimates now have CTG earning 19 cents a share, down from projections of 36 cents, First Call said. CTG will report third-quarter results Oct. 11.

"I definitely think this (spending lull) is a temporary thing," said Brace Brooks, an analyst who studies the info-tech service industry at Johnston, Lemon in Washington D.C. "This has also affected their peers -- hopefully it will be short-lived."

Expectations of a shortfall were already being reflected in CTG's stock, which was trading at a low price relative to company profits before the announcement, he said.

Other info-tech service companies are also likely to disappoint analysts, said Russell Welty, analyst at Hanifen Imhoff in Denver.

"I think once we get through that (Y2K) there's potential for a bounce-back," he said.

Consensus estimates put CTG's profit at $1.30 for 2000, up from 1999 figures but off 29 percent from previous estimates, First Call said.

Some competitors are a step ahead of CTG in fast-growing technology services, Welty said. For example, Scient in San Francisco has become a strong contender in e-commerce solutions.

"There are a lot of start-up companies in the e-business areas that have done really well," he said.

Business-to-business sales over computer networks are projected to top $1 trillion globally in 2003.

Ms. Fitzgerald denied that CTG needs to catch up in the e-commerce arena.

"Some companies are getting into specific areas, and they're getting a lot of attention because they're pure plays," she said.

CTG expects to join other technology companies as it implements customers' computer and network systems, she said. "There's plenty of business out there."

The company employs more than 6,000 info-tech professionals and has 55 offices in North America and Europe.

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