- The Washington Times - Friday, April 27, 2001

Struggling Internet consulting company Proxicom Inc. will be bought by computer giant Compaq Computer Corp. for $336 million, the companies announced yesterday afternoon.

Compaq, the largest personal-computer maker, will buy Reston-based Proxicom's 56 million outstanding shares for $5.75 each, or 33 percent more than Proxicom's closing price yesterday of $4.33 on the Nasdaq Composite Index.

Proxicom founder and Chief Executive Officer Raul J. Fernandez, 34, said in a conference call that the company will remain in Northern Virginia and none of its 950 workers will lose their jobs in Compaq's acquisition.

"This combination is all about growth and opportunity," Mr. Fernandez said. "This combination is about people. The plans are to keep all our people."

Mr. Fernandez will remain in charge of Proxicom, founded in 1991, and the company will keep its name and be merged into Compaq's global services division, which markets Internet-consulting services to businesses.

Neither Mr. Fernandez nor Compaq executives agreed to provide details about talks surrounding the acquisition.

Friedman, Billings, Ramsey senior analyst Christopher Penny said Compaq likely pursued Proxicom to bolster its list of clients.

"I don't think Proxicom was necessarily looking to be purchased, but given the right opportunity, they weren't going to turn away from it," Mr. Penny said.

Proxicom has been faced by a lagging Internet-consulting market. Last month the company said it will cut 227 jobs, or 19 percent of its work force.

Lower demand has pierced its stock price, which has fallen 86 percent from its close a year ago of $31.69 on the Nasdaq stock market. Its lower stock price made Proxicom a likely acquisition target, Mr. Penny said.

The companies announced the deal after the stock markets closed.

Proxicom had a loss last year of $5.2 million on revenue of $207 million, and Mr. Penny estimated the company would report a first-quarter loss of 12 cents a share.

Proxicom was scheduled to report first-quarter earnings May 4.

Compaq, based in Houston, will gain a nimble Internet company to offset its reputation as a stodgy personal-computer manufacturer.

"That's why we are keeping the Proxicom name," said Jeff Lynn, vice president and general manager of Compaq global services.

More important, the acquisition is expected to help Compaq reach its goal of boosting revenue of its global service division from 21 percent of corporate revenue to 30 percent, said Peter Blackmore, Compaq's executive vice president of worldwide sales and service.

"This is a very strategic move. It strengthens our in-house business in a key area," Mr. Blackmore said.

Proxicom, too, will benefit from the deal.

In keeping its name, Proxicom retains its own identity. It also will be able to align itself with a deep-pocketed Fortune 500 company. Compaq, 27th on the Fortune 500 list, had sales last year of $42.4 billion and net income of $569 million. Its stock rose 79 cents to $17.79 yesterday on the New York Stock Exchange.

Compaq has 94,600 employees.

The companies plan to complete the acquisition by the third quarter, pending shareholder and regulatory approval.

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