Scient and iXL to Merge

Jul 31 2001

Scient and iXL Enterprises announced Tuesday that they plan to merge operations, creating a union of two high-profile – but struggling – Net consultancies.

The two companies, which advise clients on the implementation of Web strategies, also reported widening losses.

Billed as a "merger of equals," the combined entity would operate under the Scient name. The boards of both companies already have approved the merger, and have the support of significant blocs of shareholders. Scient shares would be converted into 0.31 shares of the new company, while iXL shares would be converted into 0.25 shares.

The merger comes amid a brutal weakening of the technology environment that has wreaked havoc on once high-flying Net consultancies. Both Scient and iXL have laid off hundreds of employees to lower costs and have watched their share prices collapse to less than $1.

"The combination of Scient and iXL is intended to create one of the leading consulting firms in the world with a strong combination of resources, market focus and culture," iXL CEO Chris Formant said in a press release.

The two companies said Scient's expertise in strategy and architect design meshed well with iXL's development and implementation experience. Further, the combined company would save more than $100 million a year in operating costs, the companies said.

The stock market was indifferent to the news. Scient shares closed down 1.8 percent to 54 cents, or a penny from its 52-week low. IXL shares dropped 47 cents, or 47 percent, to 53 cents after setting a new 52-week low during trading hours.

Also Tuesday, New York-based Scient posted a pro forma operating loss of $14.8 million for the quarter ended June 30. By comparison, the company reported pro forma operating income of $5.2 million for the same period a year earlier. Pro forma results exclude restructuring charges, amortization of intangibles and stock-compensation charges.

"The economic weakness continues to be the predominant factor impacting our business," Scient Chairman and CEO Bob Howe said in a press release accompanying the earnings announcement. "To date, we have seen no convincing sign of a recovery."

Scient's revenue fell 88 percent, to $11.3 million from $91.4 million in the same period a year earlier.