The company said that it started the year with 128,400 client employees and expects to end the first quarter with about 124,000 client employees.

The drop is primarily because of the loss of "legacy clients," which is anticipated to cause a 7.5 percent decline in professional services fees to about $37 million in the first quarter from $40 million in the fourth quarter.

Gevity said these factors will result in first-quarter earnings of about 10 cents per share, or less than half of the average analyst estimate of 27 cents per share, based on a Thomson Financial survey of 11 analysts.

Gevity posted 2006 profits of $35.3 million, or $1.32 per share, roughly even with last year's performance. Revenues for the year were $648 million, up about 6 percent.

For the fourth quarter, Gevity posted profits of $10.6 million, or 41 cents per share, compared with $9.9 million, or 35 cents per share. Revenues during the quarter were $156 million, up slightly from $154 million during the same 2005 period.

Gevity provides payroll processing, benefits administration, workers' compensation insurance and other services to small- and medium-sized businesses around the nation.

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