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THE DAY AHEAD: E-commerce consultants to flood IPO market

The e-commerce consultants are coming! That could be the refrain of the initial public offering market lately following the successful debut of iXL Enterprises (Nasdaq: IIXL). AppNet Systems and Viant join the parade Friday.

Viant and AppNet, like iXL, are Internet e-commerce services companies. The goal for both companies is to show customers how to use the Internet as a weapon via the cliche "business solutions."



AppNet & Viant: IPO contenders?



Given iXL's June 4 initial public offering, up 49 percent on its first day, the AppNet and Viant offerings could shine -- if they don't crowd each other. AppNet is offering 6 million shares with a price range of $12 to $14 and will trade under the ticker "APNT." Credit Suisse First Boston is the lead underwriter. Viant, which will trade under "VIAN," is offering 3 million shares with a price range between $10 and $12. Goldman Sachs is the lead underwriter. Both offerings are scheduled to price tonight for trading Friday.

AppNet and Viant want to offer clients one-stop shopping. The companies will design a site, craft an e-commerce strategy, offer the back-office tools, and then help clients to promote it.

Both companies have the typical Internet IPO losses and see red for "the foreseeable future."

For 1998, AppNet reported pro forma sales of $69 million and a loss of $73.8 million. For the quarter ending March 31, AppNet reported pro forma sales of $22.2 million and a loss of $15.4 million.

Some of AppNet's 200 or so customers include: Multex.com, Ciena, Sony Electronics, Ford Motor Credit and Unilever. AppNet, founded in 1997, has built itself up via acquisitions of 12 different technology service providers since March 1998.

And investors will be paying for those purchases for a while. AppNet carries $133.1 million in goodwill as of March 31 and said those expenses could increase and dent future earnings more.

In regulatory filings, AppNet said it will use the funds from its IPO to expand its infrastructure, integrate acquired and pay down debt.

The risks for AppNet are clear. The company has to manage its growth and integrate the dozen companies it has acquired. In February 1998, AppNet had six employees. As of May 1, the headcount was 755.

Indeed, the competition facing AppNet shouldn't be overlooked.

AppNet cited no fewer than 27 competitors ranging from Web developers such as Razorfish to consultants such as iXL and Andersen Consulting to e-commerce software companies, advertising agencies and even Internet service providers.

Viant, which has 246 employees, is very similar, but has grown organically instead of using acquisitions. The potential acquisition pitfalls are removed, but Viant still loses a lot of cash. Viant reported sales of $20 million for 1999 and a loss of $6.4 million. For the quarter ending April 2, Viant reported sales of $7.8 million and a loss of $2 million.

The company also boasts some impressive customers including Compaq and Lucent, but like AppNet competes with US Web (Nasdaq: USWB), Razorfish (Nasdaq: RAZF) and iXL among others.

AppNet and Viant do differ when it comes to charging customers. Viant offers fixed-price and time contracts while AppNet bills in terms of time, materials and expenses incurred. AppNet, however, is migrating to fixed pricing.

Both offerings should do well, according to analysts. Of course that could change if investors begin asking how many Internet consultants does Wall Street really need.