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THE DAY AHEAD: Garden.com has a shot to bloom

Garden.com hopes to bloom Thursday as a publicly traded Net company and might just have a shot for big gains.

The Austin company, which tries to make gardening a community experience, planned to launch its IPO in August, but the market went sour. It will trade under the symbol "GDEN," offering 4.1 million shares priced at $12, the middle of its $11 and $13 price range.



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"It's a very interesting site, but a very targeted play," said Peony Kao, an analyst for the Renaissance Capital IPO Fund. "Sales growth is good, but it's still from a small base."

For the year ending June 30, the company reported sales of $5.4 million and a loss of $19 million. A year earlier, it reported revenue of $1.3 million, and a loss of $4.7 million Nearly all of Garden.com's sales come via e-commerce, with only $442,000 in advertising revenue for the year.

But the real thing Garden.com has going for it is an intangible -- Gardening, like golf, can be addictive. Anyone who knows a gardener knows about the obsession. Gardeners can also spend a lot of dough if they find a place on the Web to call home.

Factor a market full of gardeners with first-mover advantage and you could have a formula for a nice debut.

The site combines community, content with an e-commerce database featuring more than 16,000 products from 60 suppliers. Offerings range from a "Garden Doctor" answering service to gardening tools to plants and seeds. E-gardening could be huge. According to the National Gardening Association (NGA), U.S. households spent $46.8 billion on garden and lawn products and landscaping services in 1998. Garden.com's site had 645,000 registered users and 1.5 million unique users in May.

"We believe that gardening-related products, such as furniture, ornaments, outdoor living accessories and garden- inspired gifts, which are not included in these totals, also represent significant market opportunities," said the company in regulatory filings.

Investors may also look at the company Garden.com keeps as an indicator of where the company is heading.

On Wall Street, the lead underwriter is Hambrecht & Quist with BancBoston Robertson Stephens and Thomas Weisel Partners assisting. In the gardening world, Garden.com has a lot of powerful partners.

In May 1999, HGTV, a home and gardening cable channel, bought a stake in Garden.com. HGTV, essentially a major network for gardening/home improvement crowd, partly paid for 699,300 Garden.com shares with an advertising credit to be used over the next 24 months. Garden.com also has distribution deals with America Online and the Microsoft Network and a joint venture with Primedia, publisher of Horticulture Magazine.

Like most e-tailers, Garden.com's strategy is simple: launch a successful IPO, blow the money on marketing and build a loyal base of customers. The company will need to get off to a quick start because it competes with local gardening shops, home improvement stores such as Lowe's and Home Depot and retailers such as Wal-Mart. Garden.com also cites 1-800-Flowers.com and FTD.com as potential competitors.

In regulatory filings, Garden.com cited dependence on its suppliers and its virtual warehouse set-up as a potential risks. If suppliers don't deliver, Garden.com could lose customers.

But when you compare Garden.com with some of the other recent IPOs, this one has a chance to get rooted in real commerce. But it is young. That's why Garden.com's IPO will be closely watched. If it takes off, the door is wide open for a bunch of developing .coms.