big ipo week coming up... of particular interest... clic and kana... both underwritten by gsco...
Infrastructure IPOs hot as calendar fills
Reuters Story - September 19, 1999 09:42
By Reshma Kapadia
NEW YORK, Sept 19 (Reuters) - Deals involved with technology that helps the Internet run more efficiently and helps facilitate online business will stand out in the crowd of initial public offerings expected this week.
As many as 25 deals are expected and about 16 are involved with Internet-related businesses, according to Thomson Financial Securities Data.
"I think we'll see more deals in the coming weeks as well. For the first nine months of the year, we had about 380 IPOs, but we could do a 100 plus in the remainder of the year," said Richard Peterson of Thomson Financial.
Last week's handful of deals set a favorable tone for the onslaught of deals slated to rush to the market now that most of the investment community has returned from summer holidays.
"I think a lot of these deals were filed back in May and they have spent some time in the pipeline," Peterson said. "Some will perform admirably but others might languish."
Most of the IPOs expected to perform strongly belong to the broad Internet infrastructure, or "Internet plumbing" space, which includes firms that offer software or technology that enables businesses.
"If you look at stock performance over the last six months, the stocks that have held up have been the enabling technology stocks. They have real business models and some are profitable," said Todd Raker, an analyst at Credit Suisse First Boston that covers Internet infrastructure. "There is an enormous opportunity in this sector. These companies are offering, in general, key enabling technologies for companies trying to migrate to the Internet space," he said.
Several of this week's deals fall into this space as they try to capture investor enthusiasm for the sector.
In the market's eyes, Internet infrastructure deals have become the market darlings, replacing pure play e-commerce firms, which were the favorites earlier in the year as their stocks soared upon debut.
Some analysts said the window of opportunity has narrowed for pure play Internet firms unless they offer an unique business model in an untapped market, but the window for Internet infrastructure firms remains wide open even as more deals in this space push their way to the front of the IPO pipeline.
"Internet infrastructure covers a broad spectrum of technologies and businesses. Even if there are ten deals in one week, I don't think the market (will get saturated). It's unlikely any of the companies will be competing against each other," Raker said, noting the diversity of firms that fall under the broad Internet infrastructure umbrella.
Among the week's highly-anticipated software IPOs are: E.Piphany Inc., which offers software that firms use to establish and improve customer relations via the Internet and and Calico Commerce Inc., which makes software to facilitate sales on the Internet.
There are also several e-mail firms slated, including EGain Communications Corp. and Yesmail.com inc.
"It's pretty clear that e-mail is the killer application on the Web to date. E-mail is big theme; there is a lot more (that can be done within the space,)" said Gordon Anderson, editor-in-chief at Hoover's Online. "EGain uses e-mail to streamline a process (customer service) that is filled with headaches for companies."
Kana Communications may attract Silicon Valley insiders because of the involvement of Benchmark Capital managing member David Beirne, who is also known in the industry as one of the hottest technology recruiters.
"People will watch Kana, which provides software that lets you organize mail servers, because of David Beirne," Anderson added. "He was the most important technology recruiter in the market. Six months ago he moved to venture capital. This is his first deal."
The calendar, although it is crowded now, may lighten as the week progresses because the stock market remains fickle.
"I think the leaders or the first couple (firms) in each segment of a category will do well regardless of the current income statement but the "me-toos" are not going to do as well even if they get out," Anderson said. "My bigger prediction is that all these deals (this week) are not going to go. The market is still too temperamental."
((--Reshma Kapadia, Wall Street Desk (212) 859-1730))
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