Forbes.com betting against IIIM in the IPO:
Monday April 3, 6:10 pm Eastern Time
Forbes.com
I3 Mobile To Open Strong
By Nicole Koffey
Expect a strong initial public offering this week from Stamford, Conn.-based i3 Mobile as the wireless content provider forges ahead into unproven, yet crowded territory. Although the company offers useful information, there is insufficient evidence that a large number of wireless users will ever want to buy the service.
The deal's underwriter, Deutsche Banc Alex. Brown, hopes to raise $66 million by issuing 4.4 million shares in a price range of $14 to $16. Credit Suisse First Boston is acting as a co-manager.
I3 Mobile (Nasdaq: IIIM - news) delivers information like stock quotes, news, weather and traffic to wireless devices such as cell phones, personal digital assistants and pagers on a subscription basis. Recently the company has started offering e-commerce, e-mail and personal information management applications.
I3 Mobile targets users by striking distribution agreements with various network providers. The company currently has 15 such contracts, lending it access to 48 million subscribers, or 55% of the wireless market.
Competition in the sector is intense, speaking to the increasing view that wireless content delivery is the next big thing. Other players include InfoSpace.com, Saraide.com, MSN Mobile, Datalink, Airflash, Phone.com and Aether Systems.
Despite this, the wireless content market is very premature and has yet to demonstrate value, says Dan O'Brien of Forrester Research. ``There is currently a gold-rush mentality to offer content in the wireless market,' says O'Brien. ``But the reality is that not enough people use wireless devices to make i3 Mobile's content relevant, meaning that there simply is not enough demand to encourage the growth prospects of this company.'
At the same time, the companies have barely researched the needs of consumers. Although many of these companies, including i3 Mobile, have the technology of their product nailed down, they've done little to provide a working interface for the content, for example.
I3 Mobile's operating history speaks to the slow development of its market. The company had a net loss of $4.2 million on revenue of $1.3 million for the nine months ended Sept. 30, 1999. For the same period in 1998, the company posted a net loss of $2.2 million while revenues were $1 million. So although i3 Mobile's net loss is growing exponentially, the company's top line remains practically flat.
Adding some credibility to the company is a 5.3% ownership stake held by MCI WorldCom (Nasdaq: WCOM - news). This investment demonstrates the widely held belief that this market could constitute the next area of hot growth.
For that reason, i3 Mobile should do well in its debut--but in order not to sink in the after market, the company will need to see this belief become reality quickly.
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