Big-Ticket Buy Takes Proxicom Coast to Coast

Proxicom, touted by analysts as one of the country's leading Internet and intranet design shops, bought IBIS Consulting Inc. Sept. 2 for $60 million in stock.

Joining a wave of Internet design consolidation, Proxicom of Reston, Va., added 125 employees to its roster of 260 with the acquisition of San Francisco-based IBIS.

The deal makes Proxicom a West Coast and East Coast player with a combined $27 million in revenue last year. That number, according to company officials, should roughly double this year.

"In this environment, it is becoming increasingly important to be big," said Raul Fernandez, chief executive of Proxicom. By signing away such a sizable stake of the company to IBIS officers, Fernandez no longer holds a majority of the stock of the company he founded seven years ago. However, he is still the largest single shareholder.

Proxicom has established itself as a generalist in developing Web sites and corporate intranets, with customers ranging from General Electric and MCI Communications to Merrill Lynch and Mobil. IBIS, on the other hand, has honed its efforts in several specific markets, such as energy, health care, transportation and retail.

According to Fernandez, both companies have been profitable all along and have grown at a similar pace.

Raul Fernandez

Other companies in the Internet development market have moved into acquisition mode in recent months, namely IXL Holding of Atlanta, USWeb of Santa Clara, Calif., and AppNet Systems of Bethesda, Md.

"Consolidation in this market has taken place slower than I expected," said Gary Arlen, an analyst with Arlen Communications in Bethesda. "But now you are starting to see more of it as these developers want to push into other niches."

Arlen considers Proxicom one of the stronger developers on a national scale, and the IBIS acquisition adds to that recognition, he said.

In February, Proxicom signed its first and only other acquisition by purchasing Square Earth, a 25-person shop in New York. Fernandez's company now has offices in Reston, New York, San Francisco, Sacramento, Calif., and Munich, Germany. He said a London office is in the works for next year.

Fernandez also said that IBIS would not be Proxicom's last acquisition. But, he said, "We will only buy on a select and strategic basis."

Speculation swirled in regional technology circles earlier this summer about Proxicom's move to the public market. Fernandez would not give a time frame for an initial public offering and would only say that Proxicom is "still moving toward the public market."

One person close to the company said an IPO will most likely be brought to the table when the public market recovers from its recent turmoil.