February 2000 Contents
New vs. Old: Internet Upstart Bests Hancock In IPO Debuts Two contestants — an insurance heavyweight and a bantam, up-and-coming Web-software outfit — faced off in the IPO ring. In one corner stood John Hancock Financial Services Inc. the venerable 137-year-old insurance and asset-management giant that spent its entire corporate history as a mutually owned company. In the other, the challenger, four-year-old Extensity Inc., a provider of Internet-based office software. But not surprisingly given the heady environment of tech-stock offerings, the battle for IPO champ of Jan. 27 was over before it began. On its first day of trading, shares of Extensity shot up to $71.25 from their initial offering price of $20 each, giving the fledgling firm a $1.6 billion market capitalization. Initially, Deutsche Banc Alex Brown, the lead underwriter, had planned to sell the four million-share issue for between $8 and $10 a share. In contrast, John Hancock’s 103 million-share offering, led by Morgan Stanley Dean Witter & Co., Merrill Lynch & Co. and Citigroup’s Salomon Smith Barney, was priced at $17 a share. It edged slowly higher to $17.625, or a meager 3.7% rise, giving the veteran a stock market value of $5.8 billion. It was the latest example of the divergence between older, more traditional companies that struggle to get their IPO’s off the ground — witness Del Monte Foods Co., Neuberger & Bernum Inc. and Pepsi Bottling Group Inc. — and anything tech, telecom or Internet related, which generally have seen their share prices soar. Once, John Hancock’s performance would have been a perfectly respectable showing, especially for an insurance IPO. Until tow or three years ago, underwriters were content even delighted when the IPO’s they brought to the market ended the first trading day 10% higher. But that was in the days before the Internet revolution hit the stock market, and ignited an unprecedented boom in demand for IPO’s tied to the new economy.
Bell Atlantic, GTE Seek Merger OK Bell Atlantic and GTE Corp. are taking steps to convince regulators that their proposed merger would benefit consumers and comply with federal law. The two companies tried to address the thorniest issues associated with the deal, which would create the nation's largest local phone company, in a filing Thursday with the Federal Communications Commission. To complete the merger, originally valued at $52 billion, the companies formally proposed spinning off GTE's Internet assets into a separate public corporation. Those assets consist of GTE's Internet backbone of massive data pipelines that crisscross the country carrying computer traffic. For regulatory purposes, this constitutes long-distance service, which Bell companies are not allowed to offer within their local calling boundaries without receiving FCC approval. Bell Atlantic in December secured FCC permission to offer long-distance in New York state only, but it could take years before it gets the ability to provide long-distance throughout its local calling region of 13 states and the District of Columbia. Under the proposal, GTE's Internet assets would be transferred into a new public corporation that would be 90 percent owned and controlled by public shareholders. The merged Bell Atlantic/GTE would have a 10 percent voting and economic interest in the company, but with an option of increasing its ownership to 80 percent within five years from the closing of the merger. That gives the companies time to win needed regulatory approval to own the Internet backbone. GTE also would stop providing regular long-distance calling service in states that are within the Bell Atlantic region – aside from New York – as required by law. Taking a cue from the long list of conditions that SBC and Ameritech agreed to when those two companies combined in the fall, Bell Atlantic and GTE made commitments to extend their reach outside of the calling area they now serve.
Financial Info Site Raises $2 Million Silicon Alley has a new kid on the financial news beat, Money.net. The venture, which launched in October, announced that it has closed a deal for $2 million of first-round financing from private investors including former chairman of Oppenheimer, Nate Gantcher and Chris Blair, who ran Morgan Stanley Assets Management Technology Fund in 1997. The company offers the usual array of financial news, stock quotes and the like, with a twist--free, real time, streamed stock quotes that can be personalized. And company CEO Harold Van Arnem has bigger ambitions. Van Armen hopes to offer surfers everything from news and quotes to access to online trading and insurance services. Money.net is negotiating e-commerce deals with InsWeb.com, an online insurance company, CreditLand.com, a mortgage and loan information company, and several unnamed brokerage firms and financial planning and banking companies. In the near future, Money.net will provide users with e-commerce features that include banking and trading. Within those areas, subscribers will be able to trade stocks, pay bills, secure mortgages, and purchase insurance policies. The new money will be used to expand the company's marketing base through distribution deals for it's streamed quotes and through cross marketing deals with nationalreview.com, the conservative magazine's online site; Onvia.com, an online site for small business owners; Infonautics Corporation's site Companysleuth.com, a finance site that searches the Internet for legal information on selected companies; and Bizee.com, a business portal. Until then, Money.net will support its free real-time stock tracking service with ad revenue. Advertisers include Cnet.com and MapQuest.com. Currently, Money.net charges advertisers $40.00 a month for every 1,000 ads.
Web Frenzy Continues To Fuel M&A Activity The value of mergers in the global technology sector surged 154 percent to $1.2 trillion in 1999 as companies scrambled to adapt their businesses to meet the growing demands of the Internet economy, according to a report released on Tuesday. The total number of merger and acquisition transactions in the information technology, media and communications sector rose nearly 26 percent to 6,008 globally, according to a report by New York-based investment bank Broadview International LLC. That number is expected to grow over the next 12 to 18 months as companies react to America Online Inc.'s acquisition of media giant Time Warner Inc. Along the same lines, the demand for high-speed Internet access continues to add fuel to the M&A fire in the hardware sector, the report said. The total worldwide value of hardware deals rose nearly 128 percent in 1999, and the number of deals rose 30 percent globally. In North America alone, value jumped 147 percent while the number of deals was up 42 percent, the report said. Total deal value for North American M&A activity in the technology market in 1999 rose 89 percent to $749.2 billion from $395.8 billion in 1998, while the number of deals climbed 23 percent to 3,737 deals from 3,034 deals, the report said. In 1999, Broadview alone executed 126 transactions in the global technology sector with more than $15.4 billion in value, according to the company's Web site. Business-to-business electronic commerce companies are also heating up the market. The business-to-business sector is poised to enjoy growth of about three to six times the current market over the next several years, the report said. An 181 percent jump in IPOs across the U.S. technology sector in 1999 drove acquisitive companies to structure M&A deals to compete with initial public offering valuations, which sometimes tend to enjoy first day pops upward of 300 percent. Deninger said from 1992 to 1998, 55 percent of all companies that went public traded below their IPO value within 12 months.
Kennedy-Wilson Inc. Forms Global Technology Corporation Kennedy-Wilson, Inc. announced the formation of the Kennedy-Wilson Global Technology Corporation (KWGT). This group is dedicated to managing the company's current business-to-business venture capital investments and to building an infrastructure to incubate additional business-to-business investments in the U.S. and Asia. The Group will also manage technology related real estate investments as the world's landscape is being transformed from a collection of buildings to smart networks connected by fiber. KWGT will be overseen by Mr. McMorrow and managed by Hoch Cho and Charles Song. Mssrs. Cho and Song were previously with Cahill, Warnock & Company, a private equity firm based in Baltimore. Mr. Cho served as vice president at that company where he oversaw a full range of investment, due diligence and portfolio company management activities for its technology and business services companies. At Cahill, Warnock, Mr. Song also oversaw a full range of investment activities and portfolio company advisory work. Kennedy-Wilson has already made investments in PropertyFirst, a leading commercial multiple listing company on the Internet; Hotwire, Inc., a broadband office solution company; and eProperty.com, the Company's proprietary online real estate transaction and services company. On January 24th, Kennedy-Wilson closed its largest investment to date, a bridge financing for Infocrossing, Inc., a collocation services provider. Founded in 1977, Kennedy-Wilson is a diversified international real estate services firm. It provides real estate investment sales, property management and leasing services, construction management, development and acquisition, and technical consulting services worldwide through its offices in Los Angeles, San Francisco, New York, Chicago, Washington D.C., Dallas, Houston, Minneapolis, Tokyo and Hong Kong.
Japanese Business in the United States u With its sights set on the U.S. market, Ricoh Co. said it has developed a file-management server designed as a solution to the daily document management needs of businesses. Called eCabinet, the server was developed by California-based Ricoh Silicon Valley Inc. and is a centralized device for automatically capturing, filing and retrieving documents from virtually any source.v u Fujitsu Ltd. plans to increase the ratio of U.S. and European sales of data-storage devices to 50% of the total by fiscal 2003 from less than 10% in the current fiscal year, by bolstering its lineup of equipment for open systems.v u Nissan Motor Co. plans to begin sales in February of a gasoline-powered Sentra passenger car, known as the Sentra CA, in the U.S. state of California. The vehicle will meet the state’s Zero Emissions Vehicles standards.v u Honda Motor Co. will debut a luxury sport utility vehicle in North America the autumn. The MD-X will be powered by a 3- to 3.5-liter V-6 engine. Based on the popular Odyssey minivan, it will also comply with California’s ultra-low emission vehicle regulations.v u Fujitsu Ltd. will set up a laboratory for research and development of optical-communications technology at its Texas subsidiary, Fujitsu Network Communications Inc. Fujitsu will spend about 10 billion-yen over the next five years on the project.v u Casio Computer Co. is teaming up with U.S. start-ups to develop an Internet digital-image service. Casio is working with Zing.com, an Internet service of Zing Network Inc. and FotoNation Inc., a provider of digital-photography connectivity software.v u Daifuku Co. said it had sold two affiliated software companies in the U.S. to Brooks Automation Inc., a U.S. semiconductor-manufacturing equipment maker, for a total of $59 million. AutoSoft Corp. and AutoSimulations Inc., both located in Utah, had been wholly owned subsidiaries of Daifuku’s U.S. Subsidiary, Daifuku America Corp., since 1996.v u Advantest Corp., the world’s top producer of memory-chip testers, said it plans to create a U.S. unit to develop testers for logic and system chips. The new unit will be set up at the parent’s U.S. subsidiary in Santa Clara, California.v
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