Dow Jones Newswires -- May 6, 1999
SMARTMONEY.COM: MapQuest: Is It Really A Dot-Com?
By Paul R. La Monica
Smartmoney.com
NEW YORK (Dow Jones)--When is a company with a dot com at the end of its name not really an Internet company? When the company's name is MapQuest.com Inc. (MQST).
MapQuest, unlike many Internet companies, is not a pure-play Web investment.
But that's not necessarily a bad thing. In fact, the company has been around for more than 30 years, starting as a cartography unit of R.R. Donnelley & Sons (DNY). In the last few years, MapQuest has branched out to digital mapping, a business that includes licensed software as well as traditional print products. And, of course, the company has a well-trafficked online map service that allows stubborn male drivers to print turn-by-turn driving directions and avoid those embarrassing situations of having to stop and ask gas station attendants how to get to Main Street.
The MapQuest Web site is obviously what gives the stock its sizzle. That explains why the company changed its name earlier this year from GeoSystems Global and moved its corporate headquarters from Mountville, Pa., to New York City, the home of Silicon Alley. But ad revenues from the MapQuest site only accounted for 5.6% of revenue last year. MapQuest's business segment, which collects fees and a portion of revenue from companies that want mapping services on their Web sites, such as Yahoo! (YHOO), Sears (S) and other portals and retailers, accounted for 26.4% of sales.
The remaining 68% comes from the non-Internet-related digital-mapping business. Maybe that's why MapQuest had such a relatively tame debut - by Internet IPO standards - on Tuesday. The stock soared 75% at the open and closed at 22 3/8, 49% higher than its offering price. That's a far cry from the triple-digit gains many other high-profile Internet IPOs were fetching a couple of months ago.
But the good thing about the offering is that individual investors were not priced out on the first day. With the stock closing on Wednesday at 22 5/16, there's still a chance for small investors to buy in at a price that isn't ridiculous.
In its prospectus, MapQuest says it expects the digital-mapping business, which had 9% growth in revenue last year, to contribute less to overall revenue going forward as the company focuses more on the Internet businesses. Revenues from the consumer and business Internet segments increased by 31% in 1998. This level of growth may not be as astronomical as some other Internet companies have seen, but it is clearly far from being anemic.
To be sure MapQuest is not making any money as it is spending heavily on marketing. So in that sense it's very similar to other Internet companies.
But David Menlow, president of the IPO Financial Network, says MapQuest's more traditional mapping services provide diversification and a lower dependence on the Web, something sorely lacking in other Internet IPOs.
Menlow also says institutional buyers are likely to be attracted to the stock since Thomas Weisel Partners is one of the underwriters.
Weisel, the highly respected former head of Montgomery Securities, started his eponymous firm last year and has already been an underwriter for several high-profile IPOs, in addition to serving as an adviser to GeoCities (GCTY) in its merger with Yahoo.
All in all, MapQuest looks like it could prosper since it has brand-name recognition, little competition and a strong presence on leading Web sites.
And at its current price, you could even argue that it's not outlandishly overvalued. That's not something you could say about many other Internet-related IPOs on their second day of trading.
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