Article on Xpedior's results affecting P6
September 22, 2000
The Slowdown Continues
Last week's Xpedior revenue shortfall
affects PSINet.
By Bernice Napach, Sm@rt Partner
Not a week goes by lately without at least one
e-services firm issuing a warning about poor future
earnings. The latest doomsayer is PSI Net, an
Ashburn, Va., provider of global e-commerce
infrastructure, IT solutions, and other Internet services.
Last Friday morning, the company announced that it
has lowered revenue expectations for the second half of
2000 due to softness in the carrier-access business,
transactions-solutions business and a revenue shortfall
at Xpedior-80 percent of which it owns. PSINet
anticipates revenues of $920 million to $960 million in
the second half and $500 million cash on hand at year's
end. But that cash coffer is $600 million less than the
company claims it needs to expand its Web-hosting
business in 2001.
The announcement sent PSINet shares skidding to a
new 52-week low, near $13 a share.
IXL Enterprises, which announced its expected revenue
shortfall the previous week, also fell to a new 52-week
low. The company was hit with several class-action
investor lawsuits alleging that executives made false
and misleading statements about operations and
financial conditions in order to support the price of iXL
shares.
Other losers in our index last week include
USinternetworking, Lante and US Interactive (USI),
whose CEO, Stephen Zarrilli, resigned suddenly. He
was replaced by board member William Jennings.
Chase H&Q analyst Dirk Godsey says the change in
the executive suite "may signal some turbulence
ahead," and he wouldn't be surprised if USI fell short of
performance estimates.
Amid those declines, however, some Web consultants
soared. Scient gained 32 percent, boosted by an
upgrade to a strong buy from William Blair & Co.
Analyst Matthew Litfin said Scient's management has
indicated business is good. August was stronger than
July, and demand for new projects into Q4 is picking up
considerably. The upgrade stands out because the
company recently was downgraded by many analysts.
"Scient has been misclassified," says Litfin, who
includes the integrator in the same universe as leaders
Diamond Technology, Proxicom and Sapient. Scient
shares also may have been helped by the company's
plans to repurchase up to $25 million shares from time
to time over the next year.
Other gainers included Inforte, which says it remains
comfortable with analysts' Q3 revenue and earnings
estimates, and Razorfish.
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