April 1999 Contents
IPO Phenomenon Favors E-Commerce Ventures E-commerce companies continue to dominate the IPO market as several new ventures have made significant impacts in their grand debuts. The month of March experienced remarkable openings from iVillage, ZDNet, Autobytel.com and Priceline.com. Consequently, numerous e-commerce companies have positioned themselves in the infamous IPO pipeline. Such companies include Travelocity, Barnesandnoble.com, Claimsnet.com, and the Princeton ECOM Corporation. In order to compete with the recently successful public offering of Priceline.com, Sabre, which runs the worldís largest computerized reservation system for travel agents, is eyeing an IPO for its own online ticketing service, Travelocity. Travelocity is regarded as one of the biggest online airline booking services on the Net. Travelocityís $285 million in 1998 revenue was about eight times that of Priceline. Based on Pricelineís newly found market value of $11.5 billion, Travelocity is worth over $5 billion. The focus on Travelocity is attributed to Sabreís unveiling of a restructuring plan that combines its travel reservation and computer services division, while keeping Travelocity as a separate unit. Barnes & Noble Inc., the top U.S. bookstore chain, and German media giant Bertelsmann AG registered for an initial public offering of 15-20% of their online joint venture, barnesandnoble.com. The online bookseller said it would offer stock valued at $200 million and use the proceeds to build its business. Barnesandnoble.com may in fact be the largest IPO for 1999 as believed by numerous analysts. Barnes & Noble and Bertelsmann each own half of the online bookstore. The IPO was previously delayed after Bertelsmann agreed in October to buy half of the venture for $200 million. Since the web siteís opening, it has sold products to $1.5 million customers in 181 countries; however, it still trails its major competitor, Amazon.com, in terms of overall customer base. The biggest benefit of the IPO may be to create a liquid market for barnesandnoble.com shares, which will be reflected in the stock prices of the companyís owners. Another e-commerce company seeking to join the upper ranks of IPO madness in April is Claimsnet.com. Claimsnet.com is the leading provider of healthcare information services utilizing the Internet and proprietary technology to provide cost effective electronic transaction processing solutions for medical and dental providers. Finally, the Princeton ECOM Corporation also plans an initial public offering in the coming month. It is a leading provider of Internet bill publishing and payment services for financial institutions and large businesses that generate a substantial number of consumer bills.
Intel Acquires Level One, Telecom Giants Strike Deal Early March witnessed another deal forged by Intel, this time with Level One Communications. The stock-for-stock merger is valued at $2.2 billion in which Intel would acquire Level One. Level One Communications, a leader in communications IC technology provides silicon connectivity solutions for high-speed telecom and networking applications. These components are critical connecting links in todayís telecommunications and data communication (LAN/WAN) networks and are key building blocks for the Intranets and Internets of the future. The company combines strength in analog and digital circuit design with its communications systems expertise to produce mixed-signal solutions with increased functionality and greater reliability. Level One's data networking chip capabilities further Intel's strategy to enter the data networking market. Consequently, this will help to establish Intel as a leading component supplier for the rapidly growing Internet and Intranet equipment market segments. Another telecom deal was struck in March as Canadian telecommunications equipment company Nortel Networks announced a pact with Hewlett-Packard Co., Microsoft Corp. and Intel Corp. to combine voice mail and e-mail on computers that Hewlett would then sell to businesses. The deal, under which Hewlett-Packard will incorporate Nortel's voice and messaging technology into its widely used network server computers, reflects the rapid growth of computer networking in the telecommunications business. This hybrid technology is expected to lead ultimately to lower Internet-based voice transmission costs and new digital services for business customers. To date, telecommunications companies have mostly used proprietary technology; and, the current move to a so-called open systems approach to Internet-based services would allow business clients to carry voice traffic on their own networks in the same way they do with data traffic now. SBC, AOL Join for Internet Development, Yahoo! Acquires Broadcast.com Regional telephone company SBC Communications Inc. will offer America Online subscribers high-speed Internet access in seven states by the end of this year. The higher-speed service, expected to cost current AOL users an extra $20 a month, allows for much faster Web surfing, constant and reliable connections, and use of the Internet simultaneously with a telephone or fax on a single line. Together with the Bell Atlantic deal, which covers the Eastern Seaboard from Maine to Virginia, AOL will offer high-speed service in 21 states. The AOL online service currently has about 15 million members. AOL expects to announce other deals like the one with SBC, as well as agreements with providers of other high-speed services, such as cable modem and satellite. SBC currently makes high-speed Internet asymmetrical digital subscriber line (ADSL) access available in 2 million homes, and plans to increase that to 8.4 million homes by the end of the year. The company has not yet begun marketing its service, preferring to concentrate on rolling out access. ADSL, a way of making existing phone lines more powerful, represents the main competition to cable modem connections for high-speed Internet service. Internet powerhouse Yahoo! has struck a deal to acquire Broadcast.com for a reported $5.7 billion in stock, positioning the web portal as the leading distributor of audio and video, including movies, on the Internet. This move into entertainment by a major Internet player has significant ramifications. As Net broadcasting gains popularity with consumers, independent producers will have entirely new sources for film financing and distribution. Although distribution of films through the Internet may be years down the line, Yahoo! can expect immediate benefits from the Broadcast.com purchase. It has been trying to broaden its mostly text-based service through acquisitions such as Broadcast.com, which delivers audio and video programming range from presidential speeches to live sports events. Currently, Broadcast.com offers access to more than 425 radio and TV stations and cable networks through its web site. Alley Sparks New Investors in Reciprocal, Juno, and THINK New York-based startup company, Reciprocal, gained $15 million and a major partner in helping it become the standard for how consumers download copyright-protected music, games, and text over the Internet. Microsoft made the equity investment and has entered a strategic technology and marketing alliance with privately held Reciprocal. The company is in the business of protecting copyrights online and its technology allows content providers - record labels, video game developers, e-book distributors - to encase their digital offerings in an encrypted ìshell.î Reciprocal determines revenue based on selling encryption software and consulting with content providers. Another Silicon Alley start-up, Juno Online Services, has raised $61 million with plans of raising more as it has filed for an $86 million IPO expected to debut in April. Junoís core business is offering free e-mail accounts but as of last year it began offering paid subscription services. It allows e-mail account holders to send attached graphics and other large files. Juno also serves as a traditional Internet Service Provider. The company boasts revenue of $22 million with its subscription basis making up $6.6 million. However, direct product sales resided as the main source of income, which accounted for $8.6 million of total revenue. Juno offers a wide range of products directly, as well as outsourcing warehousing, fulfillment, billing and customer service to the Direct Alliance Corporation. Software company eShare Technologies Inc., which builds online community and customer service software, has recently received a new $6.5 million round of venture financing. The three new investors include Pequot Private Equity Funds, Penny Lane Advisors Inc., and Walden Capital Management. After a stock price drop from $38 to $9 since last April, Silicon Alley Web solutions shop THINK New Ideas this week raised new money not by going back to the public markets, but by selling $6 million worth of stock in a private placement arranged through an affiliate of Heights Capital Management, Inc. and Marshall Capital Management, Inc. Alley Web Companies Pursue IPO Frenzy, iVillage Heats up Market The number of companies planning IPOs in Silicon Alley continues to grow. This past month Juno Online Services was joined by Fashionmall.com as the latest Silicon Alley start-ups to file for public offerings. Furthermore, WIT Capital announced recently that it too would be filing to go public next month. Fashionmall.com appears to be that rarest of Internet companies--a profitable one. For 1998 the company--which builds and aggregates web sites for clothing and accessory retailers and manufacturers--reported a pro forma net income of $14,000 on revenues of a little more than $2 million. The company is looking to raise $21 million from the public offering. For the companies who have hit the public market this month, they faired extremely well. First and foremost, iVillage jumped 300% when it entered the market after an initial offering price of $24. Underwritten by Goldman Sachs, the company raised $87.6 million by selling 3.5 million shares. Despite iVillageís phenomenal start, it is currently facing heated competition from another online service provider catering to a female audience: Women.com. The rival web site tried to steal iVillageís thunder on its IPO day by announcing a deal it struck with AOL, which is also an investor in iVillage. Another Internet wonder that followed the IPO wave was Autobytel.com, an online car-sales referral service. In its opening day, shares surged 129% above its public offering of $23. A solid debut for the highly anticipated Net newcomer, particularly since the 4.5 million-share offering had been priced 35 percent above original expectations. BT Alex Brown led the $103.5 million IPO. Autobytel also faces competitive pressure from Autoweb, which went public within the same week at $14 a share. The company displayed a gain of 185% in the public offering. Autobytel is currently valued at $712 million and brings in $23.8 million in sales, but also claims accumulated losses of $43.3 million. Internet auto dealers are gaining popularity because of their competitive prices and because people enjoy shopping for vehicles without feeling pressured by aggressive sales people. Japanese Business in the United States | |
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