A week after San Francisco-based ValueAct, a $3.5 billion hedge fund, vowed to nearly double its stake in

Acxiom

(ACXM)

if it wins a proxy fight, the market remains unmoved.

After rising by 1% on the day of ValueAct's announcement, shares of the IT management solutions company have since been trading sideways. On Tuesday, the stock fell 2% to $23.04. Wednesday saw it rise 1% to $23.27.

Agitating for change at Axicom is nothing new for Jeffrey Ubben, ValueAct's founder. Last year, the hedge fund manager tried twice to buy the company outright, first for $23 a share, then for $25, to no avail. The board rejected both offers. This time, Ubben is trying to control the board through a proxy fight.

As bait, Ubben made implementation of a tender offer for 7 million shares contingent upon his hedge fund winning board seats for its three nominees at the Aug. 3 shareholder meeting. That's all three seats, not two or one. The bet is risky, considering that the activist is battling a management that previously refused to let ValueAct have its way and that has previously blocked its participation to the board.

"They're making it more difficult for him to make the changes that he wants," says Kevane Wong, an analyst a JMP Securities, who has a market outperform rating on the stock for a $27 price target for fiscal year 2007. His firm has no banking relationship with Acxiom.

Still, Ubben sent a strong message to management with last week's offer, disclosed in a 13D filing. The tender offer would give ValueAct just under 20% of Acxiom's shares, a portion large enough to increase its ownership to the maximum percentage without triggering a poison pill. And with three board representatives on the board, Ubben would be in a position to push his plan to sell the company.

But so far the message has failed to reach the market.

"The market is not indicating confidence in him winning, or the stock would be trading at his offer price of $25," says Axicom Chairman Charles Morgan, in an interview with

TheStreet.com.

Morgan's view is biased, but analysts agree that the market is scared at the prospect of Ubben losing his fight. "Should ValueAct fail to win any seats, ACXM shares could potentially sell off, as investors would likely be concerned that ValueAct would walk away," Frederick Searby, a J.P. Morgan analyst, wrote in a research report issued last week. J.P. Morgan has an investment banking relationship with the company.

Another reason for investors to be skeptical about Acxiom's shares may lie in Ubben's emphasis on management failings. Beyond that, many wonder what his plan for the company really is.

"No one really knows what ValueAct wants," says an analyst who preferred to remain anonymous due to the proxy fight. The hedge fund wants the sale of the company and a spinoff of its capital-intensive outsourcing business. But its filings are not specific about how to reach those goals.

"You have criticized our strategies and business practices but you have offered no specific alternatives," said Morgan in a letter to Ubben Tuesday. "There is absolutely no mention of Acxiom's record revenue, record profit and record cash flow or that Acxiom has enjoyed the best six months in the company's history, or that all our trend lines are positive," he wrote.

Indeed, operating cash flow for fiscal 2006 ending March 31 was $275.8 million and free cash flow was $201.8 million, both records for the company. And, while the stock currently trades for $23 and change, it traded for 15% higher, at nearly $27, as recently as late April.

That being said, the stock is down 7.8% over the past two years, compared with a gain of 9.2% in the

S&P 500

. By comparison, some of Acxiom's main competitors are up in price during the same period:

Dun & Bradstreet

(DNB)

is up 27% and

Harte-Hanks

(HHS) - Get Report

is up 3.8%.

One big problem for Acxiom has been integration issues related to two European companies it acquired in 2004. International operations represent one of the biggest risks associated with the company, says Searby. The two acquisitions, Netherlands-based Claritas Europe and Consodata, shared many common customers, leading to some "cannibalization" issues. "Their integration ended up costing the company twice as much money," said Wong.

As a result, the international service and data revenue growth for the fiscal year 2006 is down 13%.

"The company has just been through a horrible two-year transition," says Wong. The looming proxy fight in August could help determine whether more horrible days are in store.