WorldFinanceNet's take on EVOK
(Boldface is mine: included for emphasis)
worldfinancenet.com
Internet webconferencing service
The Internet is providing opportunities to increase collaboration between organizations while avoiding the inefficiencies and expense of physical travel. Webconferencing, involving integrated, real time video and voice communications, is rapidly replacing traditional telephone conference calls. Overall, the related Internet telephony market is expected to grow at a 121.3% rate, increasing from $500 million in ’99 to $12 billion in ’03.
Evoke provides integrated video and voice communications services including real time webconferencing and archivable webcasting. Started in ’97, the first products emerged in late ’98 and a new webconferencing service was introduced in 4/00. The reception has been generally positive. The company reports 550 customers including Cisco, Excite@Home, Message Media, Microsoft, Blue Mountain Arts, Lycos, Wells Fargo Bank, and Palm.
The company has also amassed an impressive list of investors, including EMC, Excite@Home, GE Capital, Microsoft, Panasonic, Softbank, and Vivendi.
Performance has been erratic, modest, and weakening. The firm began emerging in late ’98 and the 6/00 acquisition of Contigo Software doubled the size of the company. Unfortunately, the acquisition also distorts the company’s performance history. On a pro-forma, combined company basis, ’99 revenues were in the $5.4 million range with a 35% gross margin. Excluding extensive non-cash, one time charges, the firm lost 220% from operations. On a pro-forma, combined company basis, 1Q’00 revenues were in the $3.2 million range with a 14% gross margin. Excluding extensive non-cash, one time charges, the firm lost 470% from operations. Fundamentals are weakening further.
This is a relatively new industry sector and valuations are uncertain. Principle competition appears to be from Akamai which has recently acquired InterVu and Network24 Communications. While not directly comparable, some recent IPO’s may provide some valuation perspective.
· Akamai Technologies was a $234 million deal offered on 10/29. Offered at $26, it closed at $145.19 for a 458.4% first day. It recently traded at $110.69, off 23.8% in the aftermarket and in the lower half of it’s 52- week trading range.
· Centra Software was a $70 million deal offered on 2/3/00. Offered at $14, it closed at $33.25 for a 137.5% first day. It recently traded at $9.50, off 71.4% in the aftermarket and under the offering.
· iBeam Broadcasting was a $110 million deal offered on 5/18/00. Offered at $10, it closed at $14 for a 40% first day. It recently traded at $18, adding 28.6% in the aftermarket.
Pre-offering demand is reported to be moderate (Street Scoop: 2 stars).
Conclusion: This is more of a venture capital deal than an IPO. Webcasting and streaming media are expected to have outstanding potential over the next few years. This company’s investors certainly demonstrate a strong commitment. However, there is still a wide breach between promise and performance. This is still a very small company even after doubling in size with an acquisition. So the kinds of extraordinary demand that would be expected have yet to be demonstrated. The fundamentals are also weakening disturbingly with serious declines in gross margins and non-cash adjusted operating margins. This is a typical cash burning Internet with a very uncertain earnings breakeven horizon. Now the top flight investor roster and recent iBeam Broadcasting performance may add some valuation encouragement. We would expect a modest initial reception (e.g., 10%-30%) followed by eventual erosion. |
