The Status Is Quo for McKinney

Whither McKinney & Silver?

Despite last week’s rumors and published reports, the toughest question being debated in industry circles was not whether marchFirst, the troubled e-commerce services giant, would sell off the Raleigh, N.C., shop, but “Why?”

With the Chicago-based parent company’s stock trading at barely $1.40 per share (down from a high of $81.12 a year ago), the easy answer was to raise desperately needed short-term capital to keep the business afloat.

Ken Kinsella, marchFirst vice president who oversees mergers and acquisitions (and divestitures), insisted that McKinney remains a critical if not vital part of the parent’s array of services.

“You could argue that in a slimmer and more stable environment, McKinney is not as strategic an asset as our technical consulting business,” he said. “Agency work could be outsourced, but that is not a luxury we have today.”

McKinney’s 2000 billings are expected to be $350 million.

Both Kinsella and McKinney chief executive officer Don Maurer denied that the shop, which counts Audi of America and XO Communications as signature clients, was on the block. Neither, however, would rule out a sale, either in the near or long term.

“Officially, it’s business as usual,” said Maurer. “We still are working in total partnership.”

MarchFirst was created by a 1999 merger between Whittman Hart and UsWeb/CKS. It hascreated e-commerce platforms for clients that include Audi, Pottery Barn and Williams-Sonoma. Like its competitors, RazorFish of New York and Scient in San Francisco, the company has been battered by what Kinsella calls the “heroin of dot-coms.”

Last month, marchFirst said it would scale back its client base from more than 1,700 to 500, lay off 1,000 employees, and attempt to raise an additional $50 million in funding to cover losses.

“We are comfortable at getting financing,” said Kinsella. “But as stewards of our shareholders, we must look at what is strategic and what is not. If someone above me says, ‘McKinney is not strategic,’ then I will execute the directive of the executive committee.”

At present, McKinney is the cart that is pulling the horse.

“Ultimately, the issue becomes the cash issue,” said Maurer. “We have great momentum. We need people to support our brand and our resources.”