IIS Acquires K2 Digital

The consolidation dance among struggling interactive consulting firms has taken another turn with the acquisition of digital services firm K2 Digital by Arizona-based Integrated Information Systems .

IIS said it acquired certain assets, management and professional staff of the New York-based K2 Digital and that the merged staff would continue to work out of K2’s Manhattan offices. Financial details were not released.

K2 Digital, which was founded in 1993, is best known for its work providing design and development of digital channels, quantitative and usability research and online marketing. Some of its clients include ABB, Bristol-Myers Squibb, ING Aetna Financial Services and Morgan Stanley.

The merger agreement would being K2’s client roster under the roof of IIS, which is better known for back-end integration work among its consulting services and has been struggling to cope with the slowdown in tech consulting jobs in the past year.

K2 Digital describes its business offerings as a an approach that “constructs user-centric digital channels to help multi-divisional and global companies maximize their Internet opportunities.”

As those Internet opportunities evaporated in the past year as the result of companies that pulled back on their digital strategy spending, K2 Digital found itself seeking out funding commitments to help plug its revenue gaps.

For the first quarter of this year, K2 Digital declared a net loss of $1.9 million on revenues of $865,925, a drop in net sales of 42 percent compared to what it took in during the first quarter of 2000 when its net loss was $295,233.

The company’s stock now trades on an over-the-counter bulletin board after its stock price dropped below the listing requirements of the Nasdaq Stock Market and it was delisted in August.

IIS is also facing similar struggles with its revenue base after its sales dropped by 44 percent to $8.7 million for the first quarter of this year, down from $15.4 million in the same period of 2000.

Its net loss for the first quarter was $19.9 million ($1.05 per diluted share), compared to a net loss of $3.2 million (16 cents per diluted share) for the same period a year ago.

Lynn Fantom, formerly President and chief executive Officer of K2 Digital, Inc., and now the general manager of K2’s digital division, said the transaction would broaden IIS’ expertise in digital strategies and interactive design. Jim Garvey, the chief executive of IIS, said the deal brings IIS’s vertical market knowledge in line with K2’s clients in the healthcare, financial services and hospitality sectors.

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