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Proxicom to Compaq: Pay up

The Internet services company tells potential acquirer Compaq Computer to up its bid or it will take another offer.

Internet services company Proxicom on Thursday told potential acquirer Compaq Computer to up its bid or it will take another offer.

Proxicom on Monday announced that it had received an offer of $7.50 per share, or about $347 million, from Dimension Data Holdings, a South African tech company. That offer constitutes a "superior proposal" to Compaq's $266 million offer, which valued Proxicom at $5.75 per share.

If Compaq doesn't make a more favorable offer by 5 p.m. EDT on Monday, May 14, Proxicom will take the Dimension Data offer, executives said. In that case, Compaq will be entitled to a $10 million termination fee.

A Compaq representative Thursday said the company is "evaluating our options." Analysts said it's unlikely that Compaq will raise its bid for Proxicom.

The Dimension offer was made public Monday, a week after Compaq made its bid for Proxicom.

The bidding war came as somewhat of a surprise to industry watchers. The services industry has been rocked by bad news and tough economic times. Proxicom's stock hit a new low recently, and the company last week reported a loss of 13 cents a share, in line with reduced estimates. Other consulting companies such as Razorfish, IXL Enterprises and Viant have struggled as well.

The possibility of a bidding war had sent Proxicom's shares up this week, but they stumbled a bit in premarket trading Thursday, falling 3 cents to $7.50 on the Island ECN. Shares have gained 24 cents to $7.77.

Compaq was hoping to expand its services offering with the Proxicom purchase. Proxicom designs business-to-business e-commerce sites and offers support for, among other things, application development and network design.

Dimension Data designs computer and communications networks and provides customer relationship management and procurement software.