Marchfirst gains on "buy" rating

Marchfirst (Nasdaq: MRCH) was up 48 percent Monday after an analyst reinstated coverage of the stock with a "buy" rating. He said a restructuring and a recent cash infusion should dispel doubts about the company's ability to weather a downturn in the Internet consulting business.

Shares were up 0.91 to 2.78. A shakedown in the Internet consultancy business has had the company, which was created from the merger between management consulting firm Whittman-Hart and Web consultancy USWeb/CKS, struggling along with competitors like Sapient (NYSE: SAP), Razorfish (Nasdaq: RAZF), Agency.com (Nasdaq: ACOM) and iXL (Nasdaq: IIXL).

Credit Suisse First Boston analyst Mark Wolfenberger reinstated coverage with a "buy" rating and price target of $8 a share. He said the company is positioned to weather the storm thanks to its scale and breadth, global reach, broad customer base and end-to-end services offering.

"We think a critical differentiator for Marchfirst going forward is the core Whittman-Hart skill base around enterprise technology implementation and integration," the analyst said in a research note. He added that clients are trending towards a broad business partner approach versus the one-off web -driven project work of a year ago, a trend which should favor Marchfirst over time.

The company is also looking better since its $150 million investment from Francisco Partners, which closed on Dec. 28, Wolfenberger noted. The deal, which valued Marchfirst at about $450 milion, gave Francisco Partners about 32 percent of the company. A task force to improve the company's accounts receivable collection and rid unprofitable dot-coms from its client list should also alleviate near-term liquidity concerns, Wolfenberger said.

Marchfirst's restructuring has also improved the situation, with headcount reduced by about 1,000 after another round of layoffs earlier this month.

At its current valuation, Marchfirst remains one of the cheapest IT services assets," Wolfenberger said, adding on a cautionary note that "the stock is likely to remain a "show me" story in the near-term, although execution on the plan put forth could catalyze the stock medium/long-term."

Investors will be awaiting more evidence that restructuring is on track when Marchfirst will report its fourth quarter results on Feb. 12. Wolfenberger left fourth quarter revenue and earnings estimates unchanged, but raised fiscal 2001 revenue to $1.05 billion and earnings to 14 cents a share.