Proxicom Picked Up By Compaq

Compaq is buying E-services firm Proxicom Inc. in a deal valued at about $266 million. The acquisition, which has been approved by the boards of both companies, is expected to close by fall.

Proxicom, which had revenue of $207.1 million for 2000, will be a unit within Compaq Global Services, retaining its brand identity and its chairman and CEO Raul Fernandez. After a 19% staff cut in March, Proxicom brings about 900 employees and about 60 clients to Compaq.

Compaq executive VP for worldwide sales and services Peter Blackmore said Compaq passed up several E-service firms in favor of Proxicom. He said the search began a few months ago, looking for a company fitting detailed criteria: vertical industry knowledge, cultural fit, complementary customer set, and the ability to quickly integrate with Compaq. The companies already share AOL Time Warner, General Electric, General Motors, Merrill Lynch, and Toyota as customers.

Giga Information Group analyst Stephanie Moore says the acquisition was a smart move for both companies. Proxicom's standing as one of the healthier E-services firms adds another level of credibility to the Global Services division. And Compaq's decision to swallow Proxicom as a whole unit means the E-service provider can avoid additional layoffs and economic problems, she says.

Compaq is still prowling, primarily for service firms that can get Compaq Global Services into new vertical industries and global locations. The $7 billion Global Services division has about 38,000 employees and contributes more than 21% of Compaq's overall revenue. That's expected to grow to 30% within the next three years.

Proxicom said in March that it would post a loss of 12 cents to 13 cents a share for the first quarter. The company also said revenue would be $39 million to $41 million, lower than analysts' consensus estimate of $51.5 million.