In the midst of the down-turn for Internet consulting companies, a bidding war has broken out for Proxicom, one of the better-positioned players. The competition has boosted the stock price not only of Proxicom but of other respected consultancies as well, lifting our index 11 percent for the two weeks ended May 9.
As of press time, Compaq, the original bidder for Proxicom, was considering raising its $266 million offer, which equates to about $5.75 per share. Dimension Data, a South African IT company, trumped that bid with an offer of $427 million, or $7.50 per share, which Proxicom has said it will accept unless Compaq matches it before 5 p.m. on Monday, May 14.
In the meantime, Proxicom shares have gained almost 75 percent from all of the excitement.
Another vendor, Hewlett-Packard, which previously had abandoned its bid to acquire PricewaterhouseCoopers, announced that it has expanded and formalized a three-year alliance with consulting giant Accenture. The companies will promote each others services to business clients. Accenture will focus on designing and implementing new platforms and applications, and HP will manage operating systems.
No money will be exchanged, however, which makes some analysts skeptical. "This is kind of like an engagement with the option to date," says Tom Rodenhauser, president of Consulting Information Services. "Polygamists should approve," he adds. Accenture recently announced plans for a $1 billion IPO, though no date has been set.
Other winners last week included consulting firms Inforte and Digitas. Both companies are possible takeover targets, analysts say. Inforte has consistently met Wall Street earnings forecasts and specializes in CRM and supply-chain solutions. Digitas is a creative consultancy that is performing better than similar shops, despite disappointing Q1 earnings.
Predictive Systems, a networking infrastructure consulting firm, soared after reporting Q1 results showing revenues of $20.8 million, up 9 percent from a year ago but slightly below Q4 revenues. Gross margins improved as a result of cost cutting.
Among the losers were XO Communications, a broadband company saddled with billions of dollars worth of debt. The company recently received a $250 million cash infusion from Forstmann Little, a major investor, but that may not be enough for the company to survive in a weak market while paying double-digit interest on its debt.