Web based services giant, Whittman-Hart, has announced plans to acquire fellow consultancy firm, USWeb/CKS, to create a $14 billion Internet professionals services entity.
But shares in both companies dipped on the news, fearing that the companies would not be able to combine successfully. Eric Ross, an analyst with CIBC World Markets, said: "A lot of people will look at this and say, 'this is not the Whittman-Hart we used to own'."
Whittman-Hart's stock plunged 28 per cent to $57 a share, while USWeb's shares went down eight per cent to $46.81.
The new company, which is as yet unnamed, will employ around 8000 people and will continue to develop managed services and Application Service Provider (ASP) offerings. The companies want to combine Whittman-Hart's knowledge in providing services such as network design and management with USWeb's Internet marketing and advertising skills.
Both companies compete in the growing services market against EDS, Andersen Consulting, PricewaterhouseCoopers and smaller firms such as Viant, Scient and Proxicom.
Whittman-Hart chairman and chief executive, Robert Bernard, will become chief executive and president of the new company, while USWeb/CKS chief executive, Robert Shaw, takes the chairman of the board title.
Shaw pointed out that the new company will help bricks and mortar firms use the Internet as a strategic weapon, as well as support dot.com startups.
"We are targeting companies that have similar business problems but, more important, a similar mindset," said Shaw. "The delineators - Fortune 500, middle market, B2B, bricks-and-mortar-dot.com - have become irrelevant."
According to a recent report by research firm, IDC, many Internet services companies have had to go public to keep up with the demands of larger and more clients. IDC said companies such as AppNet, iXL, Proxim, US Interactive and Viant have filed to go public within the first half of 1999.
Earlier this year Joe Firmage, the founder of USWeb, stepped down as chief executive to concentrate on publicising his theory that many hi-tech advancements can be traced to a purported alien spaceship crash in Roswell, New Mexico, in 1947. Firmage was unavailable to comment on the merger.
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