Monday's resignations follow a string of disappointing announcements by the company. In February, MarchFirst posted a loss of $6.8 billion, or $37.09 a share. Excluding a $6.5 billion acquisition-related write-off, its loss was $73.2 million, or 10 cents a share wider than analysts had expected.
In early 2000, the company piled $6.8 billion of goodwill onto its balance sheet in connection with its acquisition of USWeb/CKS. MarchFirst planned to write down that goodwill over five years.
And four months ago the company said it would slash 10% of its work force, or 1,000 employees, in an effort to cut costs. The company blamed the industrywide downturn in the Internet professional-services market.
marchFirst's Internet Fairy Tale Doesn't Have a Happy Ending
By Tish Williams
Senior Writer
Originally posted at 9:25 PM ET 3/12/01 on RealMoney.com
Once upon a time, Robert Bernard was a stately prince.
marchFirst's (MRCH:Nasdaq - news) chairman and CEO walked out the door Monday, leaving behind 18 years of work in the latest fractured fairy tale from the Internet. This is the basic script for Internet endings 2001-style: your stock price falls to under a buck, you've laid off more than 2,000 employees, you've just hired your second CFO in a year and the board still wants blood, so you, President and COO Thomas Metz, and Executive Vice President Joseph Bong excuse yourselves from the table.
And they all lived happily ever after. The End.
Bernard's story began like so many rosy tales. Proving himself one of Chicago's whiz kids, in 1984 at age 22, Bernard founded Whittman-Hart consultancy, serving midsized business clients. He spent 12 years grooming the company before its $6 IPO in May of 1996. Whittman-Hart's stock price climbed to the $30s by 1999, and on March 1, 2000, Bernard took a step toward fairy tale Internet valuations by acquiring USWeb/CKS for $7.1 billion.
Scan the coverage and you'll find the wholesome quirkiness we love in our Internet megastars: a penchant for house design, a playbill under his belt, his dog-lover-driven urge to run the Three Dog Bakery biscuit store and hundreds of millions in paper wealth at the height of his company's glory. He loaned his personal jet to get a baby a heart transplant when her doctor couldn't get to a donor. All the fairy godmother powder in Mother Goose land couldn't whip up this kind of magic.
One year later our valiant prince was explaining away a cursed $6.5 billion write-off in the fourth quarter of 2000 -- the goodwill from the USWeb/CKS merger the company had previously planned to amortize over five years. A year after his Internet gambit, Bernard's empire took a $53.27-a-share loss and vowed to cut $300 million to $400 million from its overhead.
Every time a bell rings, a CEO gets a notice to pack up his things.
Today, marchFirst is trading at 98 cents, with a total market cap of $153 million. Bernard's 1999 salary was $0, according to a 2000 Securities and Exchange Commission filing, because his board's compensation committee decided to motivate its CEO with all stock, no cash. This changed when he took on the president role in 2000 for a time. (He pulled down a $130,152 salary in 1998 and $320,000 in 1997. Bernard's 1999 options were priced from the high $20s to high $30s, and the latest insider data shows his holdings to be 12.6 million shares with no sales in the past year.
As recently as September 2000, Chicago papers were touting marchFirst's hiring binge: 900 employees, about 10% of the consultancy, were brought on in the first quarter of its merged existence, despite second-quarter 2000 losses of $374.4 million. Two months later, Bernard had laid off 2,100 and was pounding the pavement for a cash infusion. marchFirst needed $100 million to make it past early 2001 and accepted $150 million from Francisco Partners in exchange for stock convertible to a 32% stake in marchFirst. UBS Warburg analyst Adam Frisch says investors' best hope is for an acquisition or an investor to take the company private. (Francisco Partners has two of its partners on marchFirst's three-person executive committee.) "You can make money in deep turnaround stories like this one, but it takes a lot of time," he cautions.
Frisch argues that you can't fault marchFirst for attacking those plump Internet dollars in 2000. And marchFirst is not alone when it comes to broken glass slippers. "The market for the pure-play e-services companies disintegrated overnight. Proxicom (PXCM:Nasdaq - news), Sapient (SAPE:Nasdaq - news) and Diamond (DTPI:Nasdaq - news) are all taking it on the chin right now," he says. "Part of that is due to the severe and sudden turn down in the marketplace, and part is due to the inherent limitations in the business model."
Meanwhile, representatives at marchFirst won't even take a message for the founding chief.
It's midnight in the middle of the pumpkin patch, and things are mighty quiet.
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