iXL Cuts as Scient Merger Looms

As expected, interactive shop iXL is closing several of its offices and downsizing in preparation for its merger with onetime rival Scient.

Atlanta-based iXL said it plans to merge offices with Scient in Boston, Chicago, Dallas, London and New York, where Scient is now headquartered.

Through these consolidations and an overall reduction in staffing, iXL said it would cut about 38 percent of its workforce, reducing staffing levels to about 500. The layoffs, a “significant number” of which are non-billable, are expected to take place through the end of the year.

The news doesn’t come as a surprise. Scient and iXL announced their intention to merge in late July, through an all-stock deal that would leave iXL as a subsidiary of Scient. Current iXL chairman U. Bertram Ellis — who will become vice-chairman following the merger — said in July that the combined company should save about $100 million annually through the combination, although the companies didn’t go into specifics.

On Thursday, iXL chief executive officer Christopher Formant reiterated that figure and pointed to “significant opportunities to gain efficiencies through the elimination of duplicate facilities, functions and systems.”

“One of our goals is to establish an organization that can deliver positive EBITDA in the first full quarter following full merger integration, even in this difficult business environment,” he said. “Our integration plan is on track, and we believe the combination of skills and experience that reside within Scient and iXL will create a new company with unique capabilities that are very much in demand.”

Formant’s promise of profitability comes following several quarters of sluggish revenues for both shops. Last quarter, Scient saw a pro forma loss of $14.8 million (or $0.20 per share) on $11.3 million in revenue, while iXL posted $32.7 million in revenue and a pro forma loss of $9.8 million, or $0.10 per share. Both shops improved over last quarter’s results, but Scient missed Wall Street estimates of a $0.11 per share performance, according to Thomson Financial/First Call consensus.

And while the firms are making big promises, the merger — which is slated to close by the end of the year — hasn’t gone without a hitch. Last month, iXL chief financial officer Michael Casey — who was to become CFO of the merged firm — resigned to pursue other opportunities, the companies said. Now, Scient CFO Michael Hand will continue in his position until a replacement can be found.

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