A post-IPO snapshot of Shutterfly

After touring 14 cities in eight days, they were just one night's sleep away from ringing the Nasdaq's opening bell. But CEO Jeff Housenbold wasn't ready to celebrate--he had one of those nagging feelings in his stomach.

Suddenly, oxygen masks dropped, lights flashed, alarms sounded and the plane dropped from 36,000 feet to 4,000 feet in a matter of seconds. On came the "fire in the engine" light and the pilot did an emergency landing at a small airport in Richmond, Va. "Have you ever seen the movie Die Hard (2)?" Housenbold asked while describing the army of emergency vehicles that approached the plane as it landed in the pouring rain.

Housenbold was the last to exit the plane because--much to the chagrin of the rescuer in a hazardous-materials suit who lifted him out--Housenbold insisted upon grabbing his laptop. "There was proprietary information on it," he said, adding, "I didn't see my life flash in front of me or anything--there was no time to think."

The emergency landing was a scary start to 8-year-old Shutterfly's run as a publicly traded company. It's fair to say the company has fared better than the charter jet. With growing profit margins and 26 consecutive quarters of year-over-year revenue growth, Shutterfly recently surpassed Kodak as the leader in online photo publishing and is holding its own against a growing, increasingly deep-pocketed list of competitors.

Nearly a year since its September 30, 2006, IPO, the Redwood City, Calif., company continues to draw favorable reviews on Wall Street. On Monday, Shutterfly stock closed at $27.06 per share, up 74 percent from the $15.55 per share closing price on its first day of trading.

But few people know how close Housenbold and some of his executives came to missing that once-in-a-lifetime perk of taking a company public: ringing the bell to start trading on the Nasdaq exchange.

Returning to that September night, Housenbold, Chief Financial Officer Stephen Recht and four bankers from lead IPO underwriter JP Morgan were stuck at the airport and still reeling from the dramatic landing (no one was hurt in the incident) at 11:50 p.m. A major storm had grounded all East Coast planes, and it wasn't likely the group would be able to get a flight out until after the next morning's 9:30 bell ringing.

Meanwhile, the rest of Shutterfly's executive team was out celebrating in Manhattan and unable to hear cell phones ringing for help. Bridgette Thomas, who runs corporate communications for the company, had flown out a day early specifically to plot the Nasdaq trip and make sure everything went smoothly. But she didn't immediately hear the seven or so urgent messages.

Planes, limos and automobiles
Not that Thomas could have done much if she had. Back in Richmond, Housenbold tore the taxi and limousine section from a phone book and the group started calling. At around 1:30 a.m.--after being chided by at least one dispatcher for seeking a ride to New York at such a ridiculous hour--they were referred to an off-duty cab driver who was willing to help, but for a price.

For $500 in cash up-front, "Gary" agreed to drive Housenbold, Recht and analyst Kristie Gan, who now works for Shutterfly, to the Big Apple in the aging minivan often used to shuttle his three kids. Gary's van could accommodate only three passengers and their luggage, so the rest of the group had to stay put.

"It smelled like a combination of french fries, vomit and cigarettes," Housenbold said, figuring a few miserable hours were worth a chance at making the bell ringing. (It's about a five-hour trip from Richmond to Manhattan, according to Mapquest.) Near Baltimore, however, when Gary fell asleep at the wheel and swerved the car into a rumble strip, Housenbold decided "he was not our guy." Housenbold then called up a limo service and hired a driver to meet them outside the Philadelphia International Airport.

That driver said there was no way they'd make it to Manhattan on time, although he changed his mind once Housenbold offered to pay him triple the established $300 fee. Housenbold wasn't sure what was scarier, the emergency plane landing, Gary's driving, or the wild limo ride at speeds pushing 90 mph.

Despite an especially anxiety-ridden backup in the Lincoln Tunnel, the group made it to their hotel in Times Square at 9:03 a.m. Housenbold showered (he had been in the same clothes for about 19 hours) and arrived at Nasqaq at 9:23 a.m. with seven minutes to spare.

Shutterfly, a 1999 start-up funded by Netscape and Silicon Graphics founder James Clark, is now the leading online photo finishing service, with a 31 percent market share ahead of Eastman Kodak's EasyShare Gallery service and Hewlett-Packard's Snapfish, said InfoTrends analyst Alan Bullock, citing a June report.

Together, the three make up a 70 percent share of the market segment, which is a separate--with some crossover--from photo-sharing sites such as Yahoo's Flickr or Fox Interactive Media's Photobucket.

Online photo-finishing services in the United States are a $600 million business--a figure that's predicted to grow to more than $1 billion by 2011, said Bullock, who focuses on online imaging trends.

That growth comes amid a relative shakeout in the marketplace. Yahoo is about to shut its Yahoo Photos service to better support its Flickr photo-sharing site. And Sony is set to close its ImageStation site and is recommending Shutterfly as an alternative to its users. That might help Shutterfly pick up a percentage point or two in terms of market share, Bullock said.

While the actual printing of photos is a staple service for these companies, they have been tapping into consumer demand for photo-based products, which typically allow for a greater profit margin than do prints.

Shutterfly's most recent acquisition, for example, was a company called Make it About Me, which lets children star in their own customized storybooks alongside Sesame Street characters. Other licensed characters Shutterfly features in its books include Thomas and Friends, Clifford the Big Red Dog and Angelina Ballerina.

Housenbold, who was recruited in 2004 from eBay and has also held executive posts at Internet companies AltaVista and Raging Bull, added that his company is crossing over naturally into the scrapbooking industry with its expanding lineup of photo memory books. A photography aficionado and a former high school and college yearbook staffer, he showed off a shiny book he created via Shutterfly to illustrate his family's recent trip to Jackson Hole, Wyo.

Such customized books have become increasingly popular for all types of consumers, he said, ranging from parents making baby books to families documenting their histories and small businesses illustrating their product lines.

The year-round sale of such memory books and other goods helps Shutterfly and its competitors make up for the seasonal nature of their holiday card business, Bullock added. Other developments for Shutterfly this year include the building of a second printing plant in Charlotte, N.C. (the other one is in Hayward, Calif.), and a retail partnership with Target.

Despite the crazy tale that led up to the ringing of the Nasqaq bell, Housenbold said it was "just a day in the life of the company." He continually reminded staff that, "If you think (the IPO is) the endgame, you're in a whole lot of trouble."