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iXL to Overhaul Strategy After Market Beating

Fresh off a week where stocks of Internet consulting firms were pummeled in the market, iXL Enterprises Inc. Tuesday announced that it was going to streamline its business and lay off employees.

IXL Chairman and Chief Executive Officer Bert Ellis said his firm, which expects revenue for the third quarter to be approximately 15 percent to 20 percent below the $119.2 million figure reported for the second quarter of 2000, was not having problems with some of its blue chip clients such as GE and Virgin, but with the growth -- slowed to a trickle -- in the dot-com world.

Citing what he called the "dot-com fear factor," Ellis said in a conference call that the consulting sector has seen a radical change in the last two months in terms of spending by clientele. Not only are firms being more careful and conservative with their spending, Ellis said, but more and more dot-coms are establishing consulting from within their firms.

He also said the larger clients have increased their sales cycles for its services targeted for the Global 1000.

Though Ellis would not specify how many employees would be laid off, he said he accepted the resignation of President and Director William Nussey last Friday. Ellis said he would assume Nussey's duties and focus on monitoring iXL's revenue growth. While he said Nussey played a key role in developing the backbone of iXL for the past two years, Ellis said the landscape had changed and that some more seasoned leadership was necessary.

In addition, co-founder Barry Sikes will resume the role of chief operating officer, a position he previously held, replacing Niraj Shah, 26. Shah will return to his previous role as iXL's executive vice president of worldwide operations.

While iXL shares dropped slightly, from $1-3/16 to $8-3/8, rivals Scient Corp.'s shares fell $5-1/16 to $22 and Viant Corp. received that largest spanking, dropping $5-11/16 to an annual low of $8-3/16.

Despite widespread sector shortfalls, Ellis remained optimistic Tuesday, saying that analysts expected the firm to experience a healthy 40 to 50 percent growth rate.

"We continue to believe, however, that there is a very strong market for our services, and that we will retain and grow our leadership position in attracting long-term engagements from large customers," Ellis said.

Donaldson Lufkin & Jenrette isn't so sure. The firm cut ratings across the Internet consulting sector, noting that some 20 Internet consulting companies had declined by an average of 64 percent this year.

"While we believe the correction appears to be near its bottom, we also believe that it will be unlikely to see any significant multiple expansion or upward estimate revisions over the next one to two quarters given the current transition in demand," DLJ said in a note.

Ellis said the decline is a "speed bump we'll get through" and noted that new areas of growth in the consulting arena will include the B2B and B2E value chain and converging services such as broadband and DSL technology.