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2HRS2GO: eLoyalty shares, execs rise

It's only natural that a company named eLoyalty (Nasdaq: ELOY) does what it can to keep its own employees, well, loyal.

So it's not too surprising the online customer management consultant recently promoted a dozen folks to vice-president. Hopefully the new titles will keep them happy for awhile, because the stock until recently hasn't: eLoyalty's stock price is down 45 percent since peaking a few days after the company spun off from Technology Solutions (Nasdaq: TSCC) last month.

Not that eLoyalty's Wall Street analysts haven't tried their darnedest to prop up the stock, starting with CS First Boston, which oversaw the spinoff. CS First Boston analyst Mark Wolfenberger upgraded ELOY to "strong buy" from a "buy" rating and boosted revenue estimates to $195 million this year.

ING Barings' Brian Maimone reiterated a "strong buy" on eLoyalty. Adams Harkness & Hill's Myrna Laine started the stock with an "accumulate" rating.

"During this transition period, we may continue to see the type of volatility that the stock has exhibited since the spin-off," Laine notes. "Nonetheless, we believe, given the Company's unique focus, strong management team, and solid growth opportunities, the stock warrants a higher multiple."

Shares of eLoyalty rose today on the analyst optimism.



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At least the number of executives is up. eLoyalty now has 130 vice-presidents, or roughly one for every five or six employees. On the surface it reminds me of Gordon Gekko's description of Teldar Paper: 32 vice-presidents and no one can figure out what they do.

But eLoyalty can tell you what its veeps do: 68 "Loyalty Managers"; 35 in management and support; 21 "Business Developers"; 11 "Proficiency Area Leaders"' a quartet of them in the Loyalty Lab, where eLoyalty builds and tests customized CRM systems.

In any case, the company, which competes with Net services firms such as Proxicom (Nasdaq: PXCM) and Viant (Nasdaq: VIAN), notes that its vice-presidential practice is hardly unique -- it's the equivalent of being a partner at a Big Five firm such as McKinsey Group or Andersen Consulting.

"These are people who have made strong contributions to a project or to the business," says eLoyalty spokeswoman Ellice Uffer, one of the 12 new vice-presidents. "They generally have 14-plus years of experience in their particular field ... It's not like these are kids out of college who we bring and train."

I can see her point, but it would be encouraging if these "New Economy" companies departed from the standard corporate practice of flinging fancy titles around to the point where the term "executive" is meaningless. I know, I know -- it's just a title.

But when every seventh employee is a vice-president, your company sounds bloated with management bureaucracy, even if it isn't. Internet firms don't necessarily have to go as far as the Yahoo! (Nasdaq: YHOO) approach of giving titles (e.g. Yahooligan) better suited to the Muppet Show, but a lighter dose of corporate trimmings wouldn't be so bad.

After all, isn't that supposed to be the whole point of the Internet?

Other issues:

  • Napster
  • Today's edition of the The Wall Street Journal notes the popular MP3 trading community chose to modify its software to start with local network searches first -- several universities complain all that downloading eats up precious bandwidth. As an occasional Napster user myself, I scoffed at the notion.

    Then I noticed WSJ.com was loading much slower than usual. What the heck was going on?

    Nothing, as it turned out. Looking at my Windows taskbar, I noticed the Napster logo was still there in the Quick Start box -- I forgot to close the program before going to bed last night. I opened the program for a moment, and suddenly discovered five uploads going on at once -- one downloader was pulling three songs off my hard drive at the same time. And there went half my bandwidth.

    Maybe those universities have a point, after all. Not that I mind sharing files; just not while I'm working.

    Oh well, at least the triple song person had good taste: not many would pick up the superb live performances of Eric Clapton and Jeff Beck together on Crossroads and 'Cause We've Ended as Lovers. 22GO>