Buy some ITRA.........Intraware busts out: a case study
By Thom Calandra, CBS MarketWatch
Last Update: 4:03 PM ET Nov 9, 1999
StockWatch in London
Commentary New!
SAN FRANCISCO (CBS.MW) -- Intraware, a California distributor of
Web software and services, is finally seeing its stock pop, thanks in part
to major alliances with heavy-duty software sellers, like Computer
Associates.
In the updraft that is the Nasdaq Stock Market,
Intraware (ITRA: news, msgs) and many other
technology companies that have been in business
for more than two years are finally getting respect
from investors. Call it the payoff.
In the case of tiny Intraware, a pact that allows the
company to deliver online corporate software sales
and other services for Computer Associates (CA:
news, msgs) products was one of the triggers for
the stock. Intraware shares gained 25 percent to
30 on Monday, and on Tuesday were headed yet
higher.
The pact gives Computer Associates the ability to
troll Intraware's database of 1,500-plus technology
professionals. In a way, Intraware, which acts as a
seamless online distributor of software licenses,
upgrades and all the other mess that comes with
technology, is casting itself as a
business-to-business operator.
CEO Peter Jackson told me Intraware's success, like a small group of
rising Internet companies, has not happened overnight. "The hyperbole
when it comes to 'business-to-business' is out there," said Jackson. "It
took us $40 million and four years to build our applications."
In a very real sense, for investors, companies such as Intraware are finally
delivering on the promise of their original prospectus statements -- that
collection of pre-IPO leaden prose that sketches out the possible risks
and rewards of a capital-seeking company.
Jackson said the
company's February
1999 initial public
offering allowed
Intraware to raise about
$65 million. Amazingly,
because gross profit
margins have expanded
to 28 percent from
expectations of 18
percent in the
company's original
business models,
Intraware has used -- "or burned" -- only $9 million of that.
Some people are noticing. Worth magazine named Intraware one of the
Internet's fastest-growing companies, along with sellers of commercial
applications and services such as Ariba (ARBA: news, msgs) and
Vignette (VIGN: news, msgs).
To be sure, Intraware is also getting credit these past few weeks for a
savvy purchase or two in the field of commercial commerce. Intraware
this autumn agreed to buy BITSource, a developer of Internet-powered
license delivery supplier, and Internet Image, an Internet-driven
application deployment and management company, for cash and stock.
Intraware shares have risen as high as 34 5/8 from 18 just seven trading
days ago -- yet still trade below the early promise they showed soon after
the IPO.
Jackson's company now handles software upgrades for entire companies,
like Netscape, via online delivery or computer discs. "The challenge four
years ago, when we started, was to send 4 gigabytes over the Internet,"
he recalls wistfully.
Can Intraware, whose market capitalization of $780 million or so is 10
times a yearly revenue run rate of $80 million, maintain momentum?
Jackson says the business of managing the software process for
corporations is still in its infancy. The CEO and president is not worried
about efforts by large enterprise software companies to attract customers
with full-page newspaper ads promising deep savings on company
software purchases and maintenance.
"SAP (SAP: news, msgs) and Oracle (ORCL: news, msgs) and
PeopleSoft (PSFT: news, msgs) are famous for saying they have the
technology . . . and then they keep you waiting for the technology,"
Jackson said.
Intraware shares Tuesday, after this article was published, rose 7 to 37.
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