In the near term, many of the IT service companies that emphasize Web services could face a rough time in the equity markets. With analysts dropping their forward-earnings estimates and many IT departments extending their timetable for implementations, service companies may have trouble hitting revenue and earnings targets. Given this uncertainty, share prices will have a hard time moving up. However, if you're looking longer term, you may consider investing in this sector. Despite the recent run-up, I'd favor AMS over MarchFirst because the user client base is less risky, making its revenue and earnings projections less susceptible to disappointment.
Valuations are comparable.
William Schaff is chief investment officer at Bay Isle Financial Corp., which manages the InformationWeek 100 Stock Index.