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iXL shares squeezed on revenue warning

Shares of the company end the day down about 16 percent after it says it expects lower-than-expected revenue in the third quarter.

2 min read
Shares of iXL Enterprises slid about 16 percent today after the company said it expects revenue for the third quarter to be 15 to 20 percent below the $119.2 million reported last quarter.

Atlanta-based iXL also said Friday it plans to post a loss for the quarter.

The news sent the company's shares tumbling nearly 25 percent to a new 52-week low of $6 per share in afternoon trading. At the end of today's regular trading session, iXL was down $1.38 to $7. iXL shares have dropped more than 88 percent this year.

Special report: End of the BeginningOnce a Wall Street favorite, iXL Enterprises has become the latest Internet consulting company to warn of tougher times to come. The company attributed the shortfall to the overall market trend to serve larger, more established clients and the lengthening of dot-com client contracts.

Analysts surveyed by First Call/Thomson Financial expected the company to post a profit of 4 cents a share.

iXL, which helps clients with projects ranging from the development of Web sites to the formulation of Internet strategies, also announced that its president, William Nussey, 34, has resigned. Chief executive Bert Ellis, 46, will assume Nussey's responsibilities, the company said.

As part of the management shuffle, co-founder Barry Sikes, 47, becomes chief operating officer, replacing 26-year-old Niraj Shah. Shah returns to his previous role as iXL's executive vice president of worldwide operations.

"In addition to returning to a more senior management team, we will work to aggressively reduce costs and realign our organization to address market and customer demands," Ellis said in a statement. "iXL has grown very quickly...Given the scale we have achieved and the changing landscape of our industry, our primary focus now is on improving the efficiency of our operations."

iXL is not the only Net consulting company that has recently shifted gears to serve the changing economy. Well-known for its expertise in helping dot-com start-ups speed their businesses onto the Web, iXL, like others in its sector, has recently moved its focus away from dot-coms to larger, more established clients that want long-term advice and need more complex systems-integration work.

But analysts have said that the overall shift in clientele means the once high-flying sector will see slower revenue growth as projects take longer to complete.

Just a day before iXL issued its revenues warning, Boston-based Viant, an iXL competitor, also cautioned of a revenues slowdown. Shares of Viant sunk to an all-time low after the company said it foresees between 12 percent and 15 percent less revenue in the third quarter than the $38.5 million it generated in the second.

Last week, analysts backed their dismal outlook on many players in the Internet consulting sector by trimming growth estimates and issuing several stock downgrades.

And while the demand for Internet consulting services remains strong, the crowded and highly competitive sector is also on the verge of massive consolidation.