June 29, 1998, TechWeb News
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Net IPO Offerings Still Hot Despite Slowing Market -- Year 2000, software firms may end up long-term winners
By Jennifer Mateyaschuk
There appears to be no limit to investors' appetite for high-tech startups. But while Internet-related stocks continue to get most of the attention, Wall Street analysts say software services and year 2000 companies may be the real winners in the long term.
The Nasdaq slipped from a high of 1,931.83 in April to below 1,750 earlier this month, before recovering some lost ground last week. But investors' enthusiasm for the initial public offerings of Internet stocks has not faltered. Inktomi (INKT-Nasdaq), a networking applications and Internet search-engine company, closed its first day of trading on June 10 at $36 a share, double its offer price. Last week, it was trading above $43.
Software.net Corp. (SWNT-Nasdaq), an online retailer, closed at 13-1/4, up 54% after its first day of trading on June 17. Last week, it was still trading above $13 a share. NetGravity (NETG-Nasdaq), a provider of online advertising and direct-marketing software, has risen 60% from its initial offer price of $9, and BroadCom (BRCM-Nasdaq), which makes cable modems and digital set-top boxes, soared to 66-1/8 last week from its initial offer price of $24 a share.
"All of these companies have found a strong reception in the marketplace," says Manish Shah, publisher and editor of IPO Maven, an online research and consulting service that covers emerging growth companies. "But it's hard to understand if these companies are actually doing well or if investors have become overly enthusiastic about Internet companies."
Some analysts say there's no way Internet companies can provide a good return on investment at their current prices.
"Many of the Internet stocks are overvalued," Shah says. He adds that software services, such as International Integration Inc., a custom software development and application migration services company, and year 2000 companies such as Cognizant Technology Solutions Corp., which provides year 2000 and European currency compliance services, are more likely to give investors a good return on their investment in the long term.
Even though investors haven't been overly enthusiastic about such companies, their fundamentals are generally more solid, Shah says, and they aren't wildly overvalued, which he says makes them more attractive than new Internet issues.
Copyright r 1998 CMP Media Inc.
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