marchFIRST: Bankruptcy Bound?
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Upstaging Tuesday's unconfirmed reports that Internet consultant marchFIRST, Inc. (Nasdaq: MRCH - news) is laying off half of its 7,000-employee workforce is a new report that the specter of bankruptcy looms for the troubled firm. In addition, The Nasdaq Stock Market today announced that trading was halted on marchFIRST stock, citing that they need additonal information from the company.
Yesterday's report by The New York Times of 3,500-person staff reduction by the Chicago-based company would essentially cut it in half. However, today in a report by The Wall Street Journal the amount was brought down to 2,000 employees. Formed by the merger of Whittman-Hart and USWeb/CKS in 1999, marchFIRST has been quickly downsizing its workforce: early this year, 550; and last year a total 2,100 people were let go.
The rumors of a marchFIRST bankruptcy have been going on for a while, but are only heightened by the recent chain of events above and beyond yesterday's layoff reports: signaling a cash-flow squeeze, the company got a $53 million bank loan payment postponed until April 16th; and a major shake-up of its executive team two weeks ago with the resignations of the company's well-known CEO Bob Bernard as well as the company's chief operating officer and executive vice president of its client services group -- all just one week after announcing the arrival of cost-buster Michael Salvati as chief financial officer.
Steve Pollema was named marchFIRST's president. David Stanton and Neil Garfinkel, of Francisco Partners, are part of the present managing board for the company.
"The death watch has begun for tech consultant marchFIRST, as controlling owners Francisco Partners prepare to declare bankruptcy and sell the company for parts. Rumors of bankruptcy have surrounded Marchfirst for weeks, ever since Francisco pushed out CEO Robert Bernard and other top executives and prepared to take drastic measures to save its $150 million investment," said David Kathman, analyst for Chicago-based Morningstar, Inc., in a report he filed on Tuesday.
But first, Francisco Partners, the firm that invested $150 million in marchFIRST last year, is moving to save its preferred stock investment by selling pieces of the company. marchFIRST's east and west offices are on the block for sale or closures, so say sources.
marchFIRST would not comment on unconfirmed reports of the layoffs or the bankruptcy issue.
However, this story is not over. A surprising local twist to this story is a report that Divine, Inc. (formerly Chicago-incubator divine Interventures) is interested in purchasing some of marchFIRST's assets, primarily its Chicago operations. The talk largely is driven by the fact that Divine still has cash from its IPO and marchFIRST has little cash.
A source said that the talk about Divine, Inc. purchasing part of marchFIRST is a "weird connection," since Divine has reinvented itself as a software vendor of enterprise portal solutions, and what marchFIRST has to offer is a shade of its earlier self.
But the talk of Divine scooping up some of marchFIRST may be more talk than action.
Said George Nichols, analyst of Morningstar, Inc.,"Flip (Divine CEO Filipowski) has a close relationship with ex-marchFIRST CEO Bernard. So it's no surprise about a Divine-marchFIRST rumor. But I would be surprised if it went through. Divine is trying to control its cash burn. Even buying marchFIRST at fire-sale prices might affect that goal."
Divine Inc. would not comment on the issue.