Report Card: James Kissane

James Kissane Bear Stearns
	Report Card 1* Overall rank 1* Rank by institutions 17* Rank by stock picking Makes money for me Saves me from disaster Makes me think Tells the truth Meaningful service, not overkill Well-connected *Out of 21. Best star rating is 3 stars. Click here for our methodology.
1st Place IT Consulting and Services

Biography

B.S., State University of New York at Albany; M.B.A., New York University. A securities analyst for 12 years, Kissane joined Bear Stearns in January 1997, where he currently focuses on the computer services industry. Prior to that, he tracked business and financial services at Salomon Smith Barney.

Industry Outlook and Style

The Winners

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Kissane focuses on the transaction processors -- companies that provide transaction reporting and billing services -- and sees the trend toward electronic commerce accelerating. Fewer than 30% of personal consumer expenditures are now made with debit cards, he says. Even an increase of 1% per year would mean massive growth for this industry -- and transaction processors would be major beneficiaries.

Among these companies, Kissane is closely identified with and bullish on First Data (FDC Quote - Cramer on FDC - Stock Picks), Sabre (TSG Quote - Cramer on TSG - Stock Picks), Convergys (CVG Quote - Cramer on CVG - Stock Picks), Ceridian (CEN Quote - Cramer on CEN - Stock Picks) and DST (DST Quote - Cramer on DST - Stock Picks). (Bear Stearns has investment banking relationships with Convergys and Ceridian.)

Kissane is also enthusiastic about human resources outsourcing, another subset of this sector. By turning to third-party specialists for help in designing, building and managing their Web-enabled human resources operations, companies will be able to focus on their core businesses, Kissane said in his June 30 weekly report. At the same time, companies will get a better HR solution at a significantly lower cost.

In his report, Kissane quoted industry estimates from Dataquest, an IT market research and consulting firm: The worldwide market for HR outsourcing should grow from $26.2 billion in 1999 to more than $76 billion in 2004, while integrated, multi-process HR outsourcing will likely expand from $900 million in 1999 to more than $12 billion in the U.S. by 2003.

Exult (EXLT Quote - Cramer on EXLT - Stock Picks), which provides employee communications, employee development, organization, payroll and recruiting, is an example of a company that should participate "in a meaningful way" in this rapid growth, Kissane said. The Irvine, Calif., company is targeting large corporations whose disparate HR operations are typically spread across multiple business units and many countries. Kissane initiated coverage of Exult, which has a market cap of approximately $800 million, in late June with a rating of attractive. (Bear Stearns has an investment banking relationship with Exult.)

Kissane is less excited about the traditional systems integration and large outsourcing names in his sector. He has a neutral rating on Computer Sciences Corp (CSC Quote - Cramer on CSC - Stock Picks) and Perot Systems (PER Quote - Cramer on PER - Stock Picks). (Bear Stearns has an investment banking relationship with Perot Systems.) As he explains it, IT spending patterns are shifting toward newer Internet specialists. To stay competitive, the traditional companies will have to "accelerate their repositioning toward Web initiatives and Web hosting," Kissane said. Among the challenges they face is attracting high-level talent. "Cultural issues are still a problem," says Kissane.

Kissane will expand his coverage universe this month. Along with colleagues Alexia Quadrani and Andrew Steinerman, he will pick up some of the hot digital professional service companies, such as Sapient(SAPE Quote - Cramer on SAPE - Stock Picks) and Proxicom (PXCM Quote - Cramer on PXCM - Stock Picks).

Institutional investors who participated in TheStreet.com's analysts' survey were impressed with Kissane's knowledge of this complex industry. One fund manager spoke of Kissane's "good relationships with covered companies," while another commended his "very thoughtful written pieces on the more traditional IT services names." Kissane also stood out for his objectivity: "He thinks independently, and is not pressured by what is in vogue," says a portfolio manager.

Stock Pick

Favorite stock for next 12 months:
First Data

Comment:
"It's an extremely focused payment processing company that is best positioned for the erosion of checks and cash by credit and debit. In addition, the company generates extremely strong cash earnings."


Rate Their Stock Picks:

Which stock do you like best? Kissane: First Data Wolfenberger: Sapient Togut: Convergys