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Technology Stocks : Salon.com (SALN) -- Ignore unavailable to you. Want to Upgrade?

To: Lance who wrote (5)	6/18/1999 1:46:00 PM
From: Mohan Marette	Respond to of 29

Salon IPO stirs unusual controversy. Looks like another POS to me,perhaps it is wise to stay the hell away from this one,I am. ============================ PALO ALTO, Calif., June 18 (Reuters) - In an industry where doubling and tripling stock prices are as common as sudden, often irrational reversals of fortune, Internet watchers are not surprised by much anymore. But some of the most jaded among them are perplexed by the upcoming public offering of Salon.com. Salon, the San Francisco-based online magazine that has no profits and only a trickle of a revenues, has been criticized for its shaky financial model as much as it has been praised for the thoughtful commentary it prints. Not only did Salon bring in a mere $3 million in revenue last year, but almost all of that came from a small number of advertisers, with whom there is no guarantee of continued business. If one single advertiser, like Borders Books, were to pull its ads, the business could be upset considerably. Borders Books, owned by Borders Group Inc. (NYSE:BGP - news), last year accounted for 13 percent of total ad revenues. Salon is in the mandated quiet period before its IPO, expected next week, and was unable to comment on its financial position. But according to the details its prospectus, even the low revenue figure it reports is misleading. Sixteen percent of its total revenue reflects the estimated value barter deals in which Salon accepted ads on its site in exchange for placing its own ads elsewhere -- deals for which it never received any actual cash. The question is how a high-brow magazine that sells little more than ideas and observations to a loyal but relatively small following can rebuild itself as a media empire that would be needed to justify a valuation well over $100 million. That is the amount Salon could be worth, on paper, in a few days when it sells shares at an expected price around $10 a share. Or, it could be worth much more, if investors stampede the way they have to get in on other ''dot com'' offerings. ''It's a difficult concept as far as IPOs go. I can't recall any other similar IPO like it,'' said David Simons of Digital Video Investments. ''The problem with any journalistic enterprise is that it is extremely labor intensive and you have that whole issue of scaling that you don't have at a Yahoo! or an eBay. That core asset base of human beings churning out copy all the time is very expensive, very difficult to leverage to profitability.'' Of course, there is always the chance this offering could be a bust. Some critics argue that is not so remote a possibility given the company's shaky financials, combined with the wave of negative publicity over the offering, and the current state of the IPO market, in which demand for even the most solid companies has softened from earlier in the year. The offering is getting notice for other reasons as well. Salon is going public in a virtually untried format called the ''Open IPO,'' in which shares will be sold through an auction rather than at a fixed price. Underwriter W. R. Hambrecht touts the Open IPO as a fairer way to price new shares, allowing all bidders rather than just select investment bankers, to influence the offering price. Some critics suspect Salon had other reasons for choosing an the Open IPO. ''I suspect they had some difficulty lining up an underwriter,'' said one analyst who asked not to be identified. On the other hand, it is not hard to ignore that it is the press itself that is airing many of these criticisms. Similar publications from Microsoft-owned Slate to The National Journal have expressed wonder over the new math that would bring Salon such a high value. Some of their points are valid, but it also raises the question of professional rivalry. Journalists sometimes joke their profession requires a vow of poverty, and the ability of some newer media outlets to cash in on Internet mania has riled some of the purists. One media outlet that shouldn't scoff at the deal is TheStreet.com (Nasdaq:TSCM - news), the financial online news service that itself went public earlier this year. But in a recent story, TheStreet described Salon's financial's as ''horrid'' and said the company had ''no way of becoming more than a marginally profitable venture at the very best.'' As Salon itself explains in its prospectus, its plans to expand into a profitable venture involve a high degree of risk. Unlike other young Internet companies that are not making money but expect to do so as they grow, Salon needs to do a lot more than just attract more readers. On Salon's lengthy ''to do'' list, are plans to build popular Internet communities to keep readers on its site and develop new sources of revenue so it is less dependent on the shaky banner ad model. It is even planning to market ''upscale Salon-branded products ... to our high-value demographic base.'' biz.yahoo.com