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PartsBase.com, Inc. (ticker: PRTS, exchange: Nasdaq) News Release - Monday, March 20, 2000
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Start-Up Hopes Plane-Parts Site Will Take Flight
Copyright: Investor?s Business Daily
By Doug Tsuruoka
Online Marketplace For Aircraft Parts Hopes IPO Will Help It Take Off
Being first on the runway with a new idea is key in the Internet world.
PartsBase.com Inc. is going to put that theory to the test. It runs what might be the first online market for buying and selling new and overhauled airplane parts. With little revenue and no profit, PartsBase.com is counting on its first-mover edge in its initial public offering, slated for Tuesday.
The company plans to make money by taking a cut from every plane part sold at its site and charging registered users a $1,200 yearly subscription fee.
The company started in 1996, when business-to-business electronic commerce was mostly just a glint in Wall Street's eye. Of late, it's been aggressively marketing its service as it prepares to sell 3 million shares to the public at an initial price of $11 to $13 a share. The lead underwriter is Roth Capital Partners Inc.
The company hopes its IPO will take off because it's caught up in the tailwinds of one of today's big trends - the use of electronic marketplaces. Such sites act as exchanges for specific industries; places where businesses buy or sell to other businesses.
The future of business-to-business e-commerce belongs to such e-marketplaces, says Leah Knight, an analyst with market researcher The Gartner Group.
"Aircraft parts are an example of where e-marketplaces are really trying to help both buyers and sellers streamline costs around transactions," Knight said.
Aerospace, Defense, Too
PartsBase.com, based in Boca Raton, Fla., doesn't confine itself to plane parts. It also intends to carve out a hunk of the parts market for the aerospace and defense markets.
The jury's still out on whether the company can establish itself as an e-marketplace. Rivals are entering the space. Analysts say only time will tell if the company is flying on more than a wing and a prayer.
PartsBase.com's strongest suit is that it has more than 13,000 registered users and 1,200 suppliers using its site. The company says that makes it the world's biggest online aviation exchange. It has more than 40 million items listed in its parts database.
Companies use PartsBase.com to buy such things as reconditioned jet engines and fuel valves. Companies that have bought items via the site include leading airplane builder Boeing Co. and Federal Express Corp.
Analysts say an e-markete can bring order to the buying and selling aviation parts.
"The way aviation parts are sold today is a very fragmented, inefficient process," said Edward Lee, an analyst with Banc of America Securities LLC in San Francisco. "These third-party e-marketplaces are ideal for the aviation industry because they allow you to match a wide variety of buyers and sellers in a very seamless, easy way."
The site strives for ease of use. People or companies looking for a specific type of overhauled Boeing 747 jet engine, for example, key in specifications for the model or version they want. The site then kicks back data on engines available for sale and their prices.
Looking for a Jet?
PartsBase.com also helps companies sell entire aircraft, engage in auctions and hire employees. It also carries industry news.
Net-based sales in the U.S. aerospace and defense markets are rising. According to industry studies, overall sales in that market will increase 17% to $219 billion in 2004 from $187 billion in 2000. This year, about 8% of those sales, or $15 billion, will take place over the Net. But by 2004, 35%, or almost $77 billion, will be via the Net. PartsBase.com is losing money. Sales are tiny.
The 70-employee firm said it lost $5.9 million last year on sales of just $360,000. In its IPO filing with the U.S. Securities and Exchange Commission, the company says that this year it will realize $1.3 million in deferred revenue from Web site subscriptions taken out late last year.
PartsBase.com faces rivals in two areas: other e-com businesses and traditional plane-parts companies that sell directly to clients.
The company's online rivals include parts locator firm Inventory Locator Service, a unit of plane parts and supplies distributor Aviall Inc., as well as the Ages Group. Boeing sells aircraft parts through Web sites as well as printed catalogs. GE Aircraft Engines, owned by General Electric Co., also competes against PartsBase.com.
Gartner's Knight, though, says PartsBase.com faces no major born-on-the-Web rivals. But its old-line rivals Boeing and GE have longer track records and greater brand recognition than does PartsBase.com.
For a company going public, even in the Net field, PartsBase.com has an especially small revenue base, analysts say.
Yet analyst Lee says there's a need for what the company does. Jet aircraft are constantly overhauled or rebuilt, he says. And there are many plane parts to keep track of.
Finding parts through an online exchange makes the job of keeping these planes in the air much easier, Lee says.
Copyright ¸ 1999 PartsBase.com. All right reserved.
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