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2HRS2GO: Online headhunters can&#039t recruit investors

Another set of job listings online comes your way. Don't everyone rush the table at once.

The field of career websites must require a titanium stomach and reinforced steel intestines, because these online job aggregators don't care at all about the turbulent seas of the IPO market. Headhunter.net (Nasdaq: HHNT) is trading just above its offering price of $10 a share, which is well below its hoped-for offering range of $12 to $14. The move comes one week after HotJobs.com (Nasdaq: HOTJ) debuted with a thud.

Formerly undiscriminating IPO investors have become selective about their Internet and technology stocks in recent months, but some companies put themselves in a corner with no choice but to flounder in the public market. Like its IPO predecessor last week, Headhunter.net needs the money now; the company ended the second quarter with $202,874 in cash, which obviously won't do for a company that racked up expenses of $8.9 million in the first half of this year.

That kind of financial performance also won't do nowadays for Internet investors suddenly wondering about profits. At the very least, a sizable top line and shrinking losses matter.

Headhunter.net has neither. It lost nearly $2.7 million on paltry revenue of $1.6 million in the second quarter. Even HotJobs.com (a younger company than Headhunter.net) did better in the same quarter: slightly higher losses of $2.9 million and much higher revenue of $3.8 million.

Stock buyers might overlook the latest financials if Headhunter.net's business model offered vast promise. But this IPO takes "Limited Operating History" to a new level, because Headhunter's current revenue model is all of two and a half months old. Until June, job listings on the website were free. Now companies pay $20 or more for each one. Since the new model was established, Headhunter.net's job listings have dropped by nearly half, although the company still boasts of more than 150,000 job descriptions listed.

At any rate, it's little more than a modified version of online classified advertising. A basic job listing costs a company $20, although employers can buy "premium" placement for their job listings. Paying for prominent display isn't a new idea in the print realm, although Headhunter.net trumpets it as something novel for the online world.

Unfortunately, novel doesn't necessarily equate to lucrative. The classifed ad plan seems to yield less revenue per customer than a subscription-based business: Headhunter.net currently has more than 4,200 companies listing jobs, compared to less than 2,000 for HotJobs.com. Subscriptions also provide more predictable revenue.

Headhunter.net averaged more than 100,000 users per business day in June. The statistic sounds impressive until compared to job sites such as Monster.com, HotJobs.com and CareerPath.com, each of which reaches more of the Internet audience and garners more unique visitors than Headhunter.net, by the latter's own admission.

Job seekers the most powerful search capabilities of any job site, Headhunter.net boasts. Rivals claim the same thing for their networks, but there might be something to Headhunter.net's boasts; the latest Electronic Recruiting Index from online recruiting analyst Internet Business Network rated Headhunter.net first in customer satisfaction, quality and quality of resumes generated, among job sites that cover multiple industries.

Major investment banks aren't impressed -- no Goldman Sachs or Merrill Lynch managing this IPO, and not even a prominent technology-oriented bank such as BancBoston Robertson Stephens or Hambrecht & Quist. Without the impetus of a major IPO underwriter, Headhunter.net won't attract the usual crowd of fund managers who might drive shares higher in pre-opening trades, thus creating flipping opportunities when the stock actually hits the larger public.

If you really care, First Union Capital Markets Corp., an arm of Wheat First Securities, leads Headhunter.net's underwriting team. But you have no reason to care at all about Headhunter.net.

Other issues:

  • EchoStar Communications Corp.
  • (Nasdaq: DISH) Shares of the second largest direct broadcast satellite provider recently shot up after it replaced Hughes Electronics as Donaldson, Lufkin & Jenrette's "Top Pick" for this often-overlooked industry. But there's still plenty of room for growth if you believe DLJ, which raised its EchoStar price target to $100 from $60.

    DLJ analyst Karim Zia predicts EchoStar will challenge Hughes' DirecTV for industry leadership once the former gets its latest satellite into orbit next month. The new platform, combined with assets bought earlier this year from a joint venture of News Corp. and MCI Worldcom, will give EchoStar more channels than DirecTV. EchoStar also has beaten DirecTV to market with an Internet television product, created with WebTV. All that adds up to market gains for EchoStar, believes Zia, who expects the company to boost its DBS share to 40 percent within five years, compared to 27 percent currently.

    It's also a growing market. The EchoStar V satellite launch comes just in time to take advantage of a bill that would let satellite companies offer local broadcasting, the lack of which has been the DBS industry's biggest disadvantage, Zia notes. The legislation is expected to pass the U.S. Congress this fall. By 2005, almost 25 million households will have DBS, more than double the current base of 10 million, Zia says.

    It was a choppy day for investors. The Nasdaq Composite Index was off 20 points to 2,637, the S&P 500 down 6.55 to 1,326.29 and the Dow Jones Industrial Average lower by 11 to 10,980.30. 22GO>

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