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Razorfish shares slide after president resigns

Shares of the Net consulting firm drop more than 20 percent after Michael Pehl says he is stepping down for personal reasons.

Shares of Razorfish today slid more than 20 percent after the Net consulting firm said its president resigned from the company.

After a little more than three months in the job, Razorfish president Michael Pehl resigned yesterday.

Analysts at Deutsche Banc Alex Brown downgraded Razorfish's stock to "buy" from "strong buy" in response to the news. The company's stock slid $3.50, or 24 percent, to $11.06 in early morning trading today.

New York-based Razorfish, a consulting company for Internet strategies and Web site design, did not name Pehl's replacement. He will continue to work with the company on a consulting basis.

A Razorfish representative said the company is not looking for a replacement at this time. Chief operating officer Jean-Philippe Maheu will assume responsibility for day-to-day operations.

"My decision to leave Razorfish was difficult and relates to personal goals at this stage of my career," Pehl said in a statement. He joined the company after it bought i-Cube last year; Pehl had been chief executive of the systems integrator.

David Mahoney, a financial analyst at Wit SoundView, said Pehl's departure is a significant loss to the company.

Michael "was very good for Razorfish," said Mahoney, who rates the company's stock a "buy." "He brought a unique perspective, which was very different from the creative side that Razorfish has had a focus (on)."

Mahoney said one of Pehl's major accomplishments was integrating i-Cube's core back-end capabilities with Razorfish's Web design front-end services, allowing project teams to help clients transfer their complete businesses to the Web.

"This was one of those things that people expected to happen but no one wanted to see happen," said Credit Suisse First Boston analyst Mark Wolfenberger. "Fundamentally, you shouldn't expect any changes in the way the company is operating. They're going to perform well throughout the rest of the year and hopefully the stock will begin to show that."

Razorfish bought i-Cube, known for its back-end technical expertise, in August 1999 in a stock deal worth roughly $677 million.

Though news of Pehl's resignation may hurt the company in the short term, Mahoney said Razorfish continues to outperform others in the highly competitive services market.

"They're actually doing quite well," he said. "(CEO) Jeff Dachis has done a good job running and guiding the company to new fronts like wireless and broadband development."

Pehl said he plans to assist Dachis during the transition and to spend time with his family.

In late May, Pehl took the role of president after seven months as the company's chief operating officer.

This is the second major departure for the company this year. Chief financial officer Larry Begley, another addition from i-Cube, left in February, citing family reasons.

Shares of the company have languished since its February high of $56.93.

Founded in 1995, Razorfish employs more than 1,800 people worldwide and works with clients such as Nokia, Charles Schwab and Excite@Home.

Bloomberg News contributed to this report.