Pundits love to say it’s a market of stocks, not a stock market. The opposite trajectories of two Chicago-based stocks–USG Corp. and Lante Corp.– prove the point.
Bouncing back from a stumble earlier this decade, the century-old USG has prospered as demand for its wallboard and other building products boomed. Yet Wall Street is unimpressed: A name synonomous with Chicago business, and tops in its field, is selling for a pitiful four times earnings.
Lante, on the other hand, reported a loss in its most recent quarter. Where USG has thousands of employees and huge capital investments in plants and equipment, Lante mainly is built on the promise of the Web. Over the past year, USG pulled in nearly as much revenue each day as Lante did in its last reported quarter.
Yet with Internet issues in hot demand, Wall Street has embraced this e-commerce consulting firm, seeing in it a potentially fantastic upside.
So, consequently investors value USG at $1.6 billion, and Lante at $2.2 billion. That bet on the future is being repeated across the market, as the General Motors of the world watch the America Onlines breeze past.
Judy Puryear and his troops at Lante Corp., a growing Chicago-based electronic-commerce firm, see two kinds of benefits in today’s stock market trends.
Like many other technology enterprises, the firm’s stock is booming, having roughly tripled in value since its initial public offering two weeks ago. In another sense, the market battering many traditional blue-chip companies are enduring puts them in a mood to hire firms like Lante so they can participate in electronic commerce.
For the past few years most e-commerce activity has been initiated by start-ups, companies like Amazon.com that have come from nowhere to amass billions in book value. But the e-commerce frenzy is spreading to more established companies, and providers like Lante are the beneficiaries.
“Now that established firms are getting competition from every corner, they’re recognizing that this is really serious,” said Puryear, Lante’s chief executive. “We’re moving into a post-industrial economy and it’s affecting everyone in every line of business.”
Although its $2.2 billion capitalization comfortably puts Lante in the top 50 of Chicago-area firms, and the company has been in business here for 15 years, it’s hardly as well known as such Chicago concerns as Wrigley, Sears or Brunswick.
But that may be changing.
“They’ve gone from being a behind-the-scenes nuts and bolts outfit to the forefront of e-consulting,” said Tom Rodenhauser, head of Consultinginfo.com, a consulting industry analyst. “They are the plumbers for the Internet sector. And the plumbers are making a ton of money.”
In the broadest terms, Lante lets companies bring together buyers and sellers to exchange goods and information electronically. And they do so in Internet time.
An example is a Chicago-based client, Eppraisals.com, which provides appraisals of antiques, art or other items over the Internet. The firm’s founder, Leslie Hindman, who has extensive experience in the appraisal business, conceived of the idea and looked for help to get into business last year.
“One reason we selected Lante was that we wanted a quick turnaround,” Hindman said. “We hired them in October and we’re up and running on-line now. That gives us the first mover’s advantage.”
In the new era, moving quickly from concept to commerce will be essential, said Puryear, who was hired in June to run Lante after heading Andersen Consulting’s e-commerce section.
“The days when you take three months to study a business, then take three months to write a report and two years to build a solution are gone,” said Puryear of the traditional consulting business.
“That approach was geared to finding a perfect solution,” he said. “Today you go from concept to a workable operation–not a perfect one–in months. After that you get customer feedback and improve it.”
This new view of a consultant’s role is a fundamental shift, Rodenhauser said.
“They’re trying to change the perception of what consultants do,” he said. “It’s not just a temporary thing and they leave. Under e-commerce they set up a system and then help you run it forever. It’s almost like they become an equity partner.”
Lante is among half a dozen firms in position to become extremely successful as e-markets consultants, Rodenhauser said.
“They’ve already been successful at recruiting talent that your Andersens and Pricewaterhouses are competing for,” he said. “That’s in part because of their stock. They give everyone options so very young employees can become rich very soon. They don’t have to wait seven or eight years to make partner as the old-line firms require.”
While the current Internet stock boom is favoring tech companies, it could become a weakness, should the market frown upon the firms it now favors.
“They’re setting very high expectations for themselves,” said Stan Lepeak, a vice president at META Group, a market research firm based in Stamford, Conn. “They’re under a lot of pressure to deliver. If they have one bad quarter and the stock tanks, a lot of people with options could go out the door, and the firm would be in deep trouble.”
That prospect doesn’t trouble Puryear, who said he expects volatility, but believes that in the long run, Lante’s value will hold up.
“The demand for these services far exceeds supply,” he said.
Unlike a lot of start-ups, Lante does have a history of profitability, although in its recent high-growth mode of acquiring new employees and new customers, it has seen some red ink. For the three months ending Dec. 31, the firm had a net loss of $2.2 million on revenue of $11.6 million. In the year-earlier quarter it logged net income of $504,000 on revenue of $4.2 million.
All of the firm’s 450 employees get stock options, Puryear said, “so they participate directly in the company’s fortunes.”
Because of Lante’s history of helping clients make technology work, Puryear said his firm has an advantage in providing strategy advice as well as technical expertise.
At first most people thought of the Internet in terms of putting up a company Web page, and then they moved to launching a business around the Web site. Now they see that building e-markets should be the goal, he said.
But electronic commerce is likely to present a moving target for some time as much of it shifts from the traditional Internet to broadband media and wireless, he said.
That is probably correct, Lepeak said.
“Everyone now is very concerned whether their company will survive, and they’re all looking for help,” he said. “Everyone realizes they need help, and Lante is one of the places where you can go to get it. It’s a good time to be in that business.”
