iXL: Shareholders Are Now the Most Important Client

In the past few months, it has been a nightmare for e-consulting companies.
The problems? Well, there is intense competition; there is difficulty
finding talented employees; and, of course, dot-com companies have been
rapidly running out of money.

As a result, the valuations of e-consulting companies have been thrashed.
One of the hardest hit has been iXL
. Yesterday, the company announced that its third quarter would
show a 15 to 20 percent fall from the past quarter; there would also be a
net loss. The stock price fell $1-3/8 to $7. The high for the year was $58-3/4.

True, while dot-coms have been cutting back on consulting services, the
Fortune 500 companies have been spending more. Isn’t this good for the
e-consultants? Not necessarily. Fortune 500 companies tend to rely on
top-tier management consulting firms, such as KPMG International, Arthur
Andersen and PricewaterhouseCoopers.

Despite this, I think there is opportunity for e-consulting. The fact is
that top-tier management consulting firms need to hire lots of personnel to
manage their projects. So why not buy e-consulting companies? With
valuations much lower, consolidation seems imminent.
And I think iXL is a great candidate.

Like most other e-consultants, iXL is not a company with a major burn rate.
Actually, in the company’s latest report, iXL had $119 million in revenues
and $3.4 million in profits. The company has such clients as Delta Air,
Chase Manhattan Bank, Cox Enterprises and WebMD. A typical project ranges
from $250,000 to $1 million.

The company announced that it has launched a restructuring, as it focuses on
traditional clients. What’s more, the company now has a new CEO and there
will be a focus on cost cutting. The transition will probably take a few
quarters, but it should be worth the wait.