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Caught in Start-Ups' Undertow, Viant Shares Plunge 41%

September 02, 2000|From Bloomberg News

Shares of Viant Corp. (ticker symbol: VIAN), Sapient Corp. (SAPE) and other companies that help set up Web sites tumbled after Viant said it will post a third-quarter loss because Internet start-ups are struggling to pay their bills and bigger customers are rethinking their Web strategies.

Viant shares plunged $5.69, or 41%, to $8.19 in Nasdaq trading. Sapient dropped $7.75, or 15%, to $44.75, and Scient Corp. (SCNT) fell $5.06, or 19%, to $22. Netopia Inc. (NTPA) fell $9.75 to $26.88, a loss of 27%.

Boston-based Viant said that money-losing Internet companies are having trouble paying the consultants that advise them on how to build and expand Web sites. Nine analysts cut ratings on Viant on Friday and shares in other Web site consultants fell on concern they will experience similar woes.

Internet consulting firms such as Viant are partly paid for their services with equity stakes in their clients, said Morton Cohen, chairman of Clarion Group, and that makes them vulnerable to the challenges facing tiny Internet start-ups.

"It's a lousy business model," Cohen said.

Viant's 41% decline was the biggest for any U.S. stock Friday with a market value of more than $500 million.

Although the company's warning raises concerns about the outlook for the industry, not all Internet consultants should be painted with the same brush, said Moshe Katri, an analyst with SG Cowen.

The Internet consultants whose financial performance is most at risk include Viant, Scient, Breakaway Solutions Inc. (BWAY) and Lante Corp. (LNTE), Katri said.

Those in a stronger position include Braun Consulting Inc. (BRNC), Razorfish Inc. (RAZF), Tanning Technology Corp. (TANN), C-bridge Internet Solutions Inc. (CBIS), MarchFirst Inc. (MRCH) and Cellular Technical Services Co. (CTSC), he said, although these stocks were also dragged down Friday.

Viant said late Thursday that it expects third-quarter sales to be 12% to 15% below the $38.5 million reported for its second quarter. It expects a per-share loss for its third quarter, contrasted with net income of 3 cents a share in the year-earlier period.

In a statement, Viant Chief Executive Bob Gett blamed the shortfall on reduced companies' spending on Internet strategy because many Web-based businesses weren't able to get funding for projects.

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