Embattled E-services provider Breakaway Solutions Inc. has decided it's had enough of trying to bail out its sinking ship with a paper cup. The Aug. 28 resignation of Breakaway president and CEO William Loftus and senior VP of professional services John Loftus are the latest in a string of stumbling blocks that have led the company to announce it is pursuing a merger or acquisition.
Breakaway Solutions held a unique place in the IT services market for a while because it was a midsize company that tried to provide consulting, outsourcing, and ongoing support services, says Joel Yaffe, a senior Giga industry analyst. Breakaway's plan was to provide the operational services that consulting firms couldn't, and provide outsourcing for midsize companies more easily than IBM Global Services or EDS could.
"But, like a lot of companies in this space, they depended too much on dot-com clients. And when larger service providers like IBM turned their attention to the midmarket, service providers like Breakaway and Xuma Inc. got pushed aside," Yaffe says.
Breakaway's chances for a successful merger or acquisition dwindle as the company is forced to jump each successive business hurdle. In June, the Nasdaq National Market delisted Breakaway as the service provider's stock fell from a 52-week high of more than $41 per share to less than one dollar per share. In April, news of a $33 million round of financing from a group of investors led by SCP Private Equity Partners and Internet Capital Group was offset by about 200 layoffs and several office closings. Another shakeup took place in April when William Loftus took over as president and CEO, replacing Breakaway founder Gordon Brooks.
Breakaway's appeal as a merger or acquisition target is fading, Yaffe says, as the service provider loses not only money but also the talent required to deliver on its full-service provider strategy.