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CTG TRYING TO GET BACK ON COURSE CAMPBELL CALLS CHANGES THE 'MOST SIGNIFICANT' EVER

Computer Task Group Inc. is trying to put its house in order this year.

The Buffalo-based computer services firm, which saw its annual revenues drop last year for the first time in its 25 years as a public company, is trying to put itself on course for renewed growth and better profits with its second major restructuring in four years.

And this time, CTG executives said they think they've got the company headed in the right direction. "We really believe we have positioned ourselves well to build this business," Gale S. Fitzgerald, the company's president and chief operating officer, told shareholders during CTG's annual meeting Wednesday.

But to put the company back on what executives hope is the right track meant making what CTG Chairman and Chief Executive Officer David N. Campbell described as the "most significant changes" in the firm's history.

So the company took a $12.8 million charge against its earnings last year to pay for a series of changes in its operations. CTG sold the hardware portion of its communications group, wrote off some obsolete assets, restructured its operations and made sweeping staff changes. The company also wrote down $21.3 million of goodwill.

But CTG also wanted to change the way it did business, since the company's revenues fell last year even though its overall markets were expanding. The firm's revenue problems have been festering for the last few years, but Campbell said they had been masked because of a $30 million boost in sales because of CTG's acquisition of new European operations in 1991 and its growing business with International Business Machines Corp.

Part of the problem was that "we were not as sensitive to what our customers were asking for" at a time when those clients were particularly interested in saving money and finding ways to boost their profits, Ms. Fitzgerald said.

What's more, CTG's prices weren't competitive and its overhead costs were too high -- problems the company hopes it has solved by focusing on eight regional centers, rather than 65 different offices, Campbell said.

And finally, CTG found that it didn't have enough flexibility with its staff to respond quickly and effectively to its clients' needs.

As a result, the company has started to use more hourly workers, which makes it easier for the firm to find people with the skills that are needed for a particular project. Ms. Fitzgerald said 22 percent of CTG's workers are employed on an hourly basis now, compared with 11 percent a year ago.

So far, the initial results have shown some improvement. CTG's profits more than doubled to $1.2 million during the first quarter.

Cost-cutting efforts have been paying off, too, as the company's selling, general and administrative expenses fell by 28 percent to $4.7 million during the first quarter. But revenues remained sluggish, off 1 percent to $77 million.

Still, Campbell said the company's goal this year is to reach $300 million in revenues again, compared with $295.5 million last year, and to earn $6 million in profits, which would be slightly better than the $5.6 million it earned in 1992 and a vast improvement from its $27.7 million loss last year.

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