Bargain Hunters Go Shopping
Sometimes winding up on the discount rack isnt such a bad thing. Just ask C-bridge Internet Solutions, the latest member of our Partner Index to be acquired in recent weeks. Consolidation among consulting firms, service providers and vendors is hardly surprising, given the fact that most Internet consulting stocks have fallen 90 percent or more since March 2000. White knights are now riding in to acquire the struggling firms for pennies on the dollar.The deal lifted C-bridge shares 19 percent for the week ended May 23, though C-bridges stock remains well below its 52-week high ($27.25). The merged company, to be known as eXcelon, will have 2001 revenue of about $100 million and cash reserves of more than $50 million, according to both Boston-based companies. The combination comes only a few weeks after similar deals involving Agency.com, Digital Island, Proxicom and Rare Medium. Elsewhere, EDS last week snapped up Structural Dynamics Research (SDR) for $950 million in cash. EDS also acquired the 14 percent of Unigraphics Solutions not already owned by the company. EDS says both deals will allow the company to better manage customer supply chains. Despite the consolidation, many Internet consulting firms remain in play. Sources say Scient, a former highflier, is having a particularly difficult time attracting potential buyers. Rumors about a potential deal with Hewlett-Packard have quieted in recent weeks. A consulting source close to HP notes that the company may not need Scient, given HPs solid Q2 performance. HPs consulting and outsourcing revenue grew 33 percent and 23 percent, respectively, during the period. Business is significantly weaker at Scient, which recently reported Q4 revenue of $27.1 million, down sharply from $65.8 million for the corresponding quarter last year. The company plans to eliminate roughly half of its 1,500 positions by the end of its June quarter. Still, Scient continues to burn through cash. The company estimates that it will have about $105 million in cash on June 30, down from $161 million on March 31. Scient hopes to deliver break-even quarterly results sometime later this calendar year.
The latest such deal involves eXcelon, which is buying C-bridge for $73 million in stock.