Compaq Folds Its Cards on Bid

Vendor decides not to raise the ante after dimension data makes higher offer for Proxicom.

South African-based Dimension Data has quietly flown under the radar in the U.S. market, buying smaller integrators in its bid to build up its presence.

But its small footprint made a big stomping noise last week, when the company crushed Compaq Computer Corp.s proposed acquisition of Proxicom.

Dimension Datas offer, which was 30 percent higher, pulled Compaq out of the running when the PC vendor last Friday declined to increase its offer.

Proxicom is now in talks with Dimension Data to iron out details, says Proxicom chairman and CEO Raul Fernandez.

"I think this is it. We feel honored that Dimension Data understood [Proxicoms] strategic value," Fernandez told [email protected] Partner.

He says the integration plan for the two companies has not yet been mapped out. Executives from both firms are expected to hunker down to work out the details.

Fernandez says he has been in constant communication with Jeremy Ord, Data Dimensions top executive, and also has spoken with executives of companies that Dimension Data acquired.

Dimension Data, listed on the London Stock Exchange, upstaged Compaqs bid of $5.75 per share, or $266 million, when it offered Proxicom $7.50 per share, or $376 million in cash, in a May 6 letter sent to Fernandez.

Compaqs April 26 offer caught Dimension Data executives by surprise because they had been courting Proxicom executives for some months and had last approached them on April 25.

Dirk Ackerman, managing director of iCommerce, the e-business arm of Dimension Data, says that the companys acquisitions of network integrators needed to be balanced by e-services.

Richard Came, director of strategy at Dimension Data says the company will not make any more e-services acquisitions in the short term, but will acquire a couple of network integration firms.

Dimension Data, founded in 1983, has revenue of $1.9 billion and has grown through acquisitions. It has 12,000 employees in 30 countries, the kind of global reach Proxicom was seeking.

Data Dimensions growth in the United States began in 1999 through six acquisitions. Its South African competitor, Datatec, also has acquired U.S. companies, most notably Bloomfield, Computers Logical and networking distributor Westcon.

Proxicom, founded in 1990 as a systems integrator, has grown into a 900-person e-business firm with a strong technical bench and a blue-chip customer list.

Analyst Vince Colicchio, VP at Southwest Securities Group is bullish on Proxicom. "I think its great for any foreign, diversified company, because Proxicom has a lot of CEO relationships with big companies based in the U.S.," says Colicchio. "They [Dimension Data] are buying the customer base."