"First, we are realigning our business strategy to focus our core strengths on high-potential client opportunities in growth markets," Robert Bernard, the Internet professional services company's chairman-CEO, said in a statement. "Second, we are restructuring our organization to reduce costs and streamline operations."
Skeptical analysts feared the rejiggering might be too little, too late. "The company faces a risk of bankruptcy," said F. Drake Johnstone, Davenport & Co. analyst.
MarchFirst also said it expected fourth quarter revenue would decline as much as 36% to $235 million, from third quarter revenue of $369.4 million. The company's other woes include the necessity of securing about $70 million in financing and a share price that closed at $1.31 on Nov. 30, down from its high of $81.13.
The realignment includes scaling back its services to independent dot-com clients. Instead, MarchFirst will focus on Global 3000 companies in seven main industries: manufacturing, financial services, high tech and telecommunications, consumer products/retail, health care, media/enter-tain-ment, and trans-portation/leisure.
The move from dot-coms to brick-and-mortar companies may be coming just as traditional operations are slowing their investments in the Net. MarchFirst faces an economy in which the problems the company was created to address are not so urgent anymore. Developing a Web business quickly doesn't seem as necessary as it did in March, when MarchFirst was formed by the merger of Whittman-Hart and USWeb/CKS.
Indeed, even the company name, which revolves around the benefits of being first, seems almost quaint now that the fear of being "Amazoned" has dissipated if not disappeared. "Corporations a year ago were saying, 'Oh my God,' but now … they feel less urgency on Web site development," Johnstone said.
MarchFirst hopes a change of structure will stave off the financial downside of what it calls "longer sales cycles for larger clients." The restructuring also reduces its 72 profit centers to four: North America; Asia Pacific; Latin America; and Europe, Middle East and Africa. It also includes selling "non-core assets," though Bernard declined to name likely candidates.
MarchFirst said it will limit its focus to six core services: brand and market development, customer acquisition and retention, revenue channel expansion, supply chain integration, intellectual capital optimization, and technology opti-mization.
This structure, the company said, will make it similar to other professional services firms, which seems to be an acknowledgement that what's left of MarchFirst's Internet cachet is of little value.
Analysts were skeptical that MarchFirst's makeover will effect significant changes, at least in the short term. "After listening to [MarchFirst's] guidance conference call … we grew more disillusioned with this company and its management," A.G. Edwards Inc. analyst Laura Browder wrote in a report. She sees management's expectations for growth in the first quarter as overly optimistic, arguing that it will take longer to implement the changes Bernard outlined.
"Longer term (at least a year), [the company] should be a more solid, focused technology business- and a more attractive investment," she wrote.