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Unlike many internet consulting shops, Proxicom will live to fight another day—though not as an independent company.
Indeed, Proxicom has chosen to weather this current economic storm under someone elses umbrella. Late last month, the company sold out to Compaq Computer.
CEO Raul Fernandez says the $266 million deal gives Proxicom the ability to provide more complex products and services and expand its global reach. It will remain a wholly owned subsidiary under the umbrella of Compaq Global Services.
In turn, Compaq acquires a 10-year-old company with strong technical skills, vertical focus, Fortune 2000 clients and a delivery methodology that validates Proxicoms entrance into our Smart 100 listing for a second consecutive year.
The company enjoyed robust business in 2000, as annual revenue grew to $207 million from $82.7 million in 1999. Like many of its rivals, Proxicom issued an earnings warning for Q1 2001 and cut nearly 20 percent of its work force to remain nimble during the economic slowdown.
After the dust settles from the demise and retrenching of Internet consultancies, industry analysts say companies like Answerthink, DiamondCluster International, Inforte, Proxicom, Sapient, Tanning Technologies and a handful of others will stay in the survivor pool or will become acquisition targets.
“Proxicom will turn out to be a survivor despite the industry,” says Natalie Walrond, a research analyst at Pacific Growth Equities. “They have strong systems-integration skills. Our opinion right now is that companies that have had technical skills in demand before the Internet will have the skills afterwards.”
Besides technical skills, Walrond admires the companys well-honed execution model, a proprietary methodology called the Proxicom Process, which is used in client engagements in its vertical go-to-market model.
Analyst Vincent Collichio of Southwest Securities sees promise on Proxicoms horizon, even though the companys stock traded near a 52-week low before rallying on word of the Compaq deal. Collichio credits Proxicoms focus on vertical markets, which were expanded in February from four to seven. “They have domain expertise, and that is what the clients want,” says Collichio. “Generic technology expertise doesnt cut it.”
However, Collichio believes some of Proxicoms weaknesses may lie in its implementation practices. Although the company does implement software packages such as those from Siebel, Collichio notes that Proxicom lacks a PeopleSoft practice. He says Proxicom may need to delve deeper into supply-chain packages and security solutions.
Proxicoms Fernandez is not taking the current downturn in stride and is relying on past experience. Fernandez recalls the company retooled its sales delivery to emphasize return on investment during the fall of 1998 when Proxicom weathered a downturn in the financial services and long-term capital markets.
Now, it is going back to tactics that worked, says Fernandez. Proxicom has recently developed an in-depth ROI process for customers during a sales pitch, he says. “We are highlighting the work that weve done in the past and quantifying that as examples,” says Fernandez.
Moving forward, the company recently created new alliances. Earlier this year, it joined BEAs Star Program and a partner program created by Epicentric, a portal software vendor. Proxicom also has alliances with Sun, Aether Systems and Ericsson Professional Services for mobile solutions.
Overall, under Compaqs umbrella, if Proxicom maintains its strong ties to customers, the company should come out less bruised than its competitors. Fernandez remains confident—if not cocky—that his company will be one of the ones left standing, even if its by Compaqs side. “The fundamentals will help us weather [the economy] more effectively than others,” he says.