Consulting firms attempt to impress the Street

Analysts and investors have questioned the deal, announced in mid-December, partially because the companies represent polar opposites in the consulting world. Whittman-Hart provides back-end integration and consulting work to midsize businesses, while USWeb/CKS focuses on front-end Web strategy, development and application hosting services to the Fortune 1000 group.

Some analysts see the combination as a perfect match, becoming a so-called one-stop shop that can handle larger, more complex business-to-business contracts. But the jury is still out on whether the combined company can steadily nab contracts and absorb the integration of differing company cultures.

USWeb/CKS has acquired around 40 smaller companies in its history.

The chilly response by both the analysts and investors sent the shares of each company tumbling on the day of the merger announcement. For the past several weeks, USWeb/CKS, which this week began trading under Whittman-Hart's ticker symbol, saw its shares in the $25 range, far from its recorded 52-week high of $58.50. Whittman-Hart has also seen a less-than-stellar stock run, trading in the $30 range. Its stock has traded as high as $81.12 in the past 52 weeks.

Analysts, who recently met with both companies, say they're slowly warming to the deal and have gained a more positive outlook.

"The Street is slowly warming up and grasping what they're trying to do," said Randall Mehl, a financial analyst at RW Baird. Mehl said that the combined company will address a greater market demand as more businesses take larger steps in building a Web presence or continue to expand and enhance their existing one.

In recent research notes, analysts Robinson-Humphrey, which downgraded the company's stock from "buy" to "outperform" the day after the merger announcement, said Whittman-Hart and USWeb/CKS seem to be on the right track with their integration plans and have jointly signed about $30 million worth of new contracts, with more deals in the works.

"Since the call (with analysts), they alleviated many fears that the deal was too large to put together," said Helen Korb, a financial analyst at Robinson-Humphrey. "It's still a little early yet, but the demand out there in the marketplace is immense for the types of services that they can offer to the client."

Korb added that the Whittman-Hart management team is strong and committed to making the deal work. Still, she said she'll keep a close eye on employee turnover figures, which will determine how well the culture integration plans are being executed.

Last quarter, both USWeb/CKS and Whittman-Hart reported employee turnover rates on the high end but still within industry averages. For the fourth quarter, USWeb/CKS's turnover rate was slightly higher, at 24 percent, compared to its third-quarter results. Whittman-Hart came in flat with a 24 percent employee turnover rate in its fourth quarter.

Following the official close of the deal yesterday, financial firms SG Cowen and Warburg Dillon Read reiterated their "buy" ratings on the company's stock, while PaineWebber increased its rating to "buy" from "attractive."

Bob Bernard, founder of Whittman-Hart and CEO of the combined company, downplayed the integration concern and said USWeb/CKS has not received a fair portrayal.

"Over the last 12 weeks, there hasn't been a fair assessment of the quality of USWeb's organization," Bernard said. "Sure, there are finite issues, but for the most part (integration issues) are 100 percent behind them."

Bernard said that he is confident that the companies have done their parts to prove to the analyst community that the combination is a powerful one.