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The stock market has been running out of steam lately, but Net companies are still lining up to go public -- with some trepidation.
At least 14 technology-related firms have scheduled an initial public offering next week, but several, or even all of them, could delay their IPOs if technology stocks continue to slide.
This week alone, at least three Net companies delayed their IPOs because of the tech-stock drop. E-commerce companies especially have taken a hit as investors have reevaluated the earnings prospects of outfits such as Amazon.com (AMZN).
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"This isn't the most opportune time," said Lawrence York, a portfolio manager at the WWW Internet Fund. "There's weakness right now in general, and more companies may postpone their IPOs until we turn this thing around and the fears go away."
Still, the current month-long slide in tech stocks won't last forever, analysts said. So companies in the IPO registration process likely won't withdraw their offerings completely.
"To a lot of people the sky is falling," said Randall Roth, an analyst at the IPO Plus Aftermarket Fund. "To us, we're just going back to what has traditionally been the norm."
Now that the hysteria over exploding Net stocks seems to have died down, investors are most likely to bid up the stocks of only those companies that have profits.
Next week's front-runner looks to be Ditech Corp., a company that manufactures telecommunications equipment.
"That sector has been strong," said Steven Tuen, an analyst at IPO Value Monitor. "The telecom companies are more tangible. These sales are for real, as opposed to selling ads on a network, which can fluctuate with the number of visits to a Web site."
Though it's a small company, Ditech has proved to be profitable. In 1998, the Mountain View, California company saw revenues of US$12.3 million on losses of just $7,000. The company seeks to raise $39 million in a 3-million-share offering. BT Alex. Brown is the lead underwriter.
Another potential winner could be F5 Networks, a small company with an influential underwriter, Hambrecht & Quist. The Seattle-based maker of Internet traffic management devices had a loss of $3.7 million last year on revenues of $4.9 million. It plans to raise as much as $41 million on a sale of 3 million shares.
Among the several Internet companies that have lined up to go public next week, analysts are hard-pressed to find a sure-fire winner in the bunch.
"It's a very rocky market," said Roth. "It's hard to say what will do well. Inflation probably raises the specter of interest rates going up and it makes the cost of raising capital a lot harder. That hurts a lot of these companies."
Nonetheless, certain firms will draw attention from true believers by virtue of their Net-ness. For that reason, Quepasa.com looks promising, analysts said. The Spanish portal and search engine hopes to raise $55.2 million in a 4-million-share offering that will be underwritten by Cruttenden Roth.
Drkoop.com is likely to raise interest as well as eyebrows among investors. Even with former Surgeon General C. Everett Koop on board as chairman, the Internet-based consumer health-care network has had an inauspicious start. Last year, the firm had losses of $17.7 million on revenues of just $43,000.
Given the competition from better-known health information companies such as WebMD, Dr. Koop could have a rough opening day. The company will offer 9.4 million shares in an attempt to raise up to $84.4 million. Bear Stearns will underwrite the transaction.
Another possible winner could be Phone.com, a developer of software that delivers Internet services to wireless telephones. The Redwood City, California firm is looking to raise up to $55.2 million in a 4-million-share offering underwritten by Credit Suisse First Boston.
Backweb Technologies could draw a lot of attention. The Israeli Internet software company will go public with a 5.5-million-share offering in the coming week. Along with Pointcast and Marimba, it was one of the pioneers of so-called push software.
