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Technology Stocks : Internet Capital Group Inc. (ICGE) -- Ignore unavailable to you. Want to Upgrade?

To: still learning who wrote (711)	10/26/1999 9:40:00 PM
From: Susan G	Read Replies (1) \| Respond to of 4187

Breakaway: A Hot Cyber Consultant with a Keiretsu Behind It COMPANY CLOSEUP By Amy Barrett October 26, 1999 The startup can look to fellow Internet Capital Group companies for clients, and a wider circle of budding e-commerce players will likely welcome its help Why has Internet Capital Group Inc. been 1999's fifth-hottest initial public offering? Start with the company's web of relationships. ICG invests in Internet startups that help other companies do business on the Web, and it's building a keiretsu-like network by sparking business deals among its portfolio companies. ICG founders Walter W. Buckley III and Kenneth A. Fox figure that sort of cross-fertilization will help them snag a big piece of the $130 billion market for business-to-business commerce on the Internet. And the market's belief in ICG's recipe has made Boston-based Breakaway Solutions Inc. a pretty hot startup in its own right. None of ICG's portfolio companies enjoy closer ties to the holding company's brass than Internet consulting firm Breakaway. Breakaway's business runs the gamut from giving midsize corporations and startups everything from e-business strategic planning to running the resulting operations on Breakaway's servers. Its managers go way back with ICG's top executives: 42-year-old Breakaway CEO Gordon Brooks spent eight years working at Cambridge Technology Partners with Christopher H. Greendale, now an ICG managing director. And Cambridge was funded in the early days by Safeguard Scientifics, where ICG founders Buckley and Fox earned their dealmaking stripes. Those cozy ties have paid big dividends for Breakaway. ICG bought a 53% stake in the company last fall, around the time Greendale persuaded Brooks to come run the company. At the same time ICG's ties to other Internet startups have helped build out Breakaway's customer base. "This whole relationship -- me, Gordon, and ICG -- has worked like clockwork," says ICG's Greendale, who also serves as chairman of Breakaway's board. businessweek.com -------------------------------------------------------------------------------- Breakaway's IPO has been a rousing success, with the stock shooting up from $14 to $50 -------------------------------------------------------------------------------- The stock market echoed that sentiment. Breakaway's initial public offering on Oct. 6 has been a rousing success: The offering was priced at $14, and the shares now trade around $50, putting the company's market value at more than $800 million. Much of the excitement stems from the potential size of Breakaway's market. International Data Corp. figures the market for professional Internet services will leap from $7.8 billion in 1998 to $78.6 billion in 2003. While competitors like Sapient Corp. and Scient cater more to big corporations, Brooks says Breakaway's niche will be startups and mid-tier operators -- companies or divisions within giant corporations with less than $500 million in revenue. "That market is incredibly underserved," Brooks says. Analysts say Breakaway can help budding e-commerce players develop resources comparable to those of big guys like Amazon.com Inc. Asha N. May, an analyst at Dataquest, says Breakaway can help clients track data on who is coming to their companies' Web sites, how visitors are navigating the site, and what products the client's customers seem most interested in. That information, in turn, should let Breakaway's client refine its e-tailing strategy. "These companies are smaller, but they have the same needs as a larger organization," says May. And a lot of them belong to ICG, giving Brooks a place to start looking for clients. Breakaway now provides services to six ICG companies, including VerticalNet Inc., which has created online trading communities for 52 different industries. And he has deals with three others in the works. "ICG doesn't force it," Brooks says. "But they certainly recommend us." -------------------------------------------------------------------------------- "They understand the advantage of being the first mover, carving out that space, and establishing the brand," says eRisks' Lam -------------------------------------------------------------------------------- But Brooks knows he can't build a big company on serving ICG alone. He figures only about 15% of Breakaway's $7.5 million in first-half revenues came from ICG partner companies. (The company lost $2.5 million during the first six months of 1999). Among Breakaway's non-ICG customers is ERisks.com, a new portal for risk management professionals in fields like credit and insurance. eRisks.com President James C. Lam says Breakaway helped him refine and implement his strategy. The result: eRisks moved from the original concept to launch in just four months. "They understand the advantage of being the first mover, carving out that space, and establishing the brand," says Lam. Industry pros figure Breakaway will thrive if it sticks to its knitting. Stan J. Lepeak, vice-president at market-research firm META Group Inc., warns that Breakaway could stumble if the company goes after bigger clients, putting it in head-to-head competition with giants like Andersen Consulting or IBM. Lepeak also expects that consolidation among smaller Web consulting firms, which has begun in earnest during 1999, will pick up even more next year. But he figures that if Breakaway stays focused on its middle-market niche, the company has a good shot at being the hunter and not the prey. Already, Brooks has done three deals to round out Breakaway's offerings. Brooks's allies at ICG will also be there to help Breakaway grab a piece of the Internet pie. And it never hurts to have friends in high places. Barrett is Business Week's bureau manager in Philadelphia.