West Corporation

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West Corporation

11808 Miracle Hills Drive
Omaha, Nebraska 68154
U.S.A.
Telephone: (402) 963-1200
Toll Free: (800) 542-1000
Fax: (402) 963-1550
Web site: http://www.west.com

Public Company
Incorporated: 1986 as West TeleServices Corporation
Employees: 24,200
Sales: $724.5 million (2000)
Stock Exchanges: NASDAQ
Ticker Symbol: WSTC
NAIC: 54199 All Other Professional, Scientific and Technical Services

West Corporation is a major provider of a variety of telephone-based services for large corporations. AT&T, Microsoft, IBM, Nuance, Dell, Compaq, Bank of America, Cisco Systems, MCI Worldcom, Nortel Networks, and Dialogic are some of its customers. West handles live inbound and outbound calls and automated interactive teleservices. It operates 30 call centers and seven automated voice and data processing centers in North America and India. Its approximately 25,000 Information Age employees use the most advanced telephone, voice, and Internet technologies to provide customer service, telemarketing, credit card applications, prepaid phone card service, and a myriad of other specialized phone-based forms of assistance.

Origins and Early Years

Mary West, a teleservices pioneer, in 1973 founded Mardex, described by journalist Ray Tuttle as “one of the first telemarketing service agencies.” Mardex grew to become one of the country’s major companies handling inbound telemarketing phone calls. In 1978 Mary West founded WATS Marketing of America. Her husband Gary West left his hospital job the following year to become WATS’s chairman, president, and CEO, while Mary West served as vice-president of finance. In 1980 they sold WATS to First Data Resources but remained as managers.

By the mid-1980s more such teleservices firms were started, including Sitel in 1985 in Omaha, Nebraska. In 1986 Mary West left WATS to start West TeleServices, her third teleservices firm. It also was founded in Omaha.

The company grew in the early 1990s, so that by 1994 it was handling 55 million operator-assisted calls annually. By December 1996 the company’s Texas expansion had resulted in the employment of about 5,000 persons statewide. It was at that time San Antonio’s fourth largest private employer and also operated facilities in E1 Paso and Killeen, Texas. Later several new facilities in Texas and other border states would be built. With clients in cellular services, office products, telecommunications, payroll systems, and financial services, West TeleServices was poised for major growth that required new investments.

IPO, Stock Decline, and Failed Bid to Go Private Again: 1996–98

By the mid-1990s several private companies, including West TeleServices, were succeeding in the relatively new call center business. Then in 1995 and 1996 eight companies in the industry went public. Sitel Corp. led the pack in June 1995, followed by Apac in October. In 1996 the “teleservice floodgates opened,” said the Wall Street Journal’s Greg Ip on September 15, 1998.

On November 26, 1996 West TeleServices was the last of the eight companies to have its IPO. The first day of the IPO closed with the company’s common stock at $21.88 per share, up from the initial price of $18 per share. The company’s IPO raised $102.6 million, most of which was planned for repaying debts and notes issued to existing stockholders.

Like that of several competitors, West TeleServices’stock value declined in the next two years. In July 1998 it sold for a little more than $12 a share. This declining stock price was part of an industry trend caused by what Greg Ip called the “collision between flagging demand and expanding capacity.” The American bull economy of the 1990s saw so many companies enter the call center business that an oversupply was created. In addition, some large corporations decided to decrease their contracts with teleservice firms. While stock of some of the companies increased from 200 to 600 percent at first, by September 1998 all eight traded below their IPO prices.

In July 1998 the three founders of West TeleServices tried to buy the company’s publicly traded common stock and thus return it to a private corporation. Gary L. West, Mary E. West, and Troy L. Eden offered to pay about $126 million for the 14.8 percent of the company’s common stock that they did not already own. The company’s board formed a special committee to consider the offer, but in August the committee advised against the move. At that point, the three founders gave up their plan.

Company Expansion in the Late 1990s

Although West TeleServices was disappointed in its declining stock value, that did not stop the company from growing rapidly in the late 1990s. In November 1997 the company’s Omaha employees were quite crowded, so the firm spent $14 million for the MFS Communications Company building on Miracle Hills Drive. Then it began moving executive and administrative staff to the new headquarters, while its vacated offices at its Maple Street location were quickly filled with employees from other crowded Omaha locations. By early November 1998 West TeleServices occupied most of its new headquarters, while WorldCom Inc., which had acquired MFS Communications, still had some offices in the building. West TeleServices at that time employed 1,850 individuals at 11 Omaha facilities.

The company chose to expand by diversifying its services. According to Ken Winston, vice-president of Boston-based Needham & Company, West TeleServices avoided the overcapacity problem of its competitors by offering three services: outbound calls, inbound calls, and interactive calls using computers.

That company strategy resulted in numerous call centers being opened in the late 1990s. As of May 1, 1997, West TeleServices operated seven call centers in Omaha; Hampton, Virginia; and the five Texas cities of Killeen, San Antonio, Universal City, Waco, and Lubbock. In 1997 the company opened call centers in Tulsa, Oklahoma; Memphis, Tennessee; Mobile, Alabama; and Texarkana, Arkansas. Eight additional call centers were started in 1998: Fayetteville, Arkansas; Reno, Nevada; Rockford, Illinois; Fort Smith, Arkansas; Lafayette, Louisiana; Carbondale, Illinois; and Dothan, Alabama.

West TeleServices’ largest call center started in 1998 in Baton Rouge, Louisiana, which initially provided approximately 1,000 new jobs. The new center paid over $12 million annually to its workforce, which in turn created a local economic impact of over $86 million. The Louisiana state government provided a $250,000 grant to the company to train workers at the new center.

The new West TeleServices facility in Baton Rouge helped make that city prominent in the call center industry. By the end of 1999 it employed about 1,600 and planned to add another 2,400 employees in 2000. Other teleservices companies with Baton Rouge operations were Broadwing Communications and Convergys Corporation. In 2000 Baton Rouge led the nation with its addition of 4,500 new call center jobs.

With the advance of teleservices, more people disliked or even hated what they felt were unwanted and irritating telemarketing or phone survey calls. Phone companies began offering caller identification equipment to let people know who was calling before they picked up the phone. According to an Arbitron NewMedia survey reported in the Omaha World-Herald on September 26, 1999, 40 percent of Americans used caller identification, up from just 9 percent in 1995. In addition, in 1998 Ameritech began offering its Privacy Manager system to allow customers to block undesired incoming calls. U.S. West likewise provided blocking services, and individuals could write to the Direct Marketing Association to ask for their names to be eliminated from calling lists.

West TeleServices said such efforts would not hurt its business. “I don’t see that as a problem,” said Carol Padon, vice-president of investor relations, in the September 23, 1998 Omaha World-Herald. “We really only want to talk to people who want to talk to us. We certainly don’t want to waste their time or ours.” Padon added that West TeleServices did not make random calls but phoned only persons who already had some kind of business association with a client.

West TeleServices’ expansion reflected the general growth in teleservices. Maureen Pettirossi said in a 1997 industry publication that “the industry has emerged to play a vital and dynamic role in the economy, representing an extremely large and fast-growing market totaling an estimated $81 billion.” More companies decided to delegate such duties rather than worry about running an inhouse call center. One of the fastest growing segments of the telecommunications industry, call centers in 1997 brought in $18.3 billion in revenues. By the fall of 1998 over 1,000 companies provided some kind of call center assistance. The leaders of this relatively new industry were Convergys, West TeleServices, APAC Teleservices, and ITI Marketing Services.

Company Perspectives:

Flexibility, reliability and responsiveness to customers—that is what West is about. We listen to our customers and develop a solution to meet their needs and grow their business .

West TeleServices used the latest technology to provide its phone services. For example, it began using Unicenter TNG technology provided by Computer Associates. Originally West had used its own software to automatically respond to calls, but it chose Unicenter TNG after one of its bank clients had security problems. Unicenter TNG provided a standardized way for West’s UNIX servers to handle the increasing volume of calls for credit card applications, other customer service requests, web applications, and especially prepaid calling card customers. In 1997 Telemarketing and Call Center Solutions honored West TeleServices as the top provider of interactive services. In 1997 West handled 935 million minutes of teleservice transactions, and by late 1998 it had in place over 10,000 automated voice response ports, one of the largest capabilities in its industry.

Developments in 2000 and Beyond

In the fall 2000 campaign, Republican Rick Lazio ran against Democrat Hillary Rodham Clinton for the U.S. Senate seat from New York. The state Republican party, not candidate Lazio, sponsored telephone calls that indirectly criticized Mrs. Clinton for her ties to enemies of Israel. The calls made from the Lubbock, Texas facility of West TeleServices lasted only a few days before being discontinued by the GOP, after an article in the New York Times alleged that the calls were a form of push-polling that reputable pollsters do not use.

The company continued to increase its capabilities by opening a leased 35,000-square-foot call center in Beaumont, Texas, in early 2001. The new facility hired about 1,000 employees whose annual payroll was between $16 million and $18 million. Other new call centers that were opened in 2001 in Pensacola, Florida, and Harlingen, Texas, employed about 700 and 300, respectively.

In cooperation with eFunds Corporation, West Corporation in January 2001 opened a facility in Mumbai, India, that handled inbound customer service calls 24 hours a day, seven days a week. This call center, which began with 250 positions, was West Corporation’s first facility outside North America.

West Corporation and other companies began operating call centers in India for several reasons.

First, many well-educated Indians were available who spoke excellent English, India being a former British colony. They learned American or British accents, depending on the clients they served. They also worked for as much as 70 percent less than what comparable workers would receive in the United States or Canada. Although such information workers earned more money than many in their country, critics said they were being exploited in sweatshop conditions. Others complained about the loss of local culture as a result of such globalized economic activities.

In 2000 West Corporation’s total revenue was $724.5 million, an increase of 28.8 percent over 1999 revenue of $562.4 million. The company’s net income rose 41.2 percent from $49.8 million in 1999 to $70.3 million in 2000. That excellent financial performance prepared it for the ups and downs ahead in the 21st century.

Principal Subsidiaries

West Telemarketing Corp.; West Interactive Corp.; West Telemarketing Outbound Corp.

Principal Competitors

Convergys Corporation; Sitel Corp.; RMH Teleservices, Inc.; TeleTech Holdings.

Key Dates:

1986:: West TeleServices Corporation is started.
1996:: Company becomes a public corporation, listed on the NASDAQ.
1997:: Call centers are opened in Tulsa, Oklahoma; Mobile, Alabama; and Memphis, Tennessee.
1998:: Company opens call centers in Lafayette and Baton Rouge, Louisiana; Carbondale and Rockford, Illinois; Reno, Nevada; and Fort Smith and Fayette-ville, Arkansas; attempt to take West TeleServices private again is ended in August.
1999:: Call centers are opened in Dothan, Alabama; Hinesville, Georgia; and Tallahassee, Florida.
2000:: Call centers are started in Erie, Pennsylvania; Huntsville, Alabama; and Oklahoma City; West TeleServices and Synchrony Communications form a strategic alliance; company is renamed West Corporation
2001:: Call centers are begun in Mumbai, India; Pensacola, Florida; and Harlingen and Beaumont, Texas.