Allaire taking on the tech giants and thriving

The company, which builds software that helps businesses create e-commerce Web sites, has seen its stock price jump about $10 today to $170. Allaire this afternoon announced a two-for-one stock split as it posted its first quarterly profit since going public nearly a year ago.

Excluding one-time costs, Allaire today announced a fourth-quarter profit of $478,000, or 3 cents a share, compared to a net loss of $4.3 million, or 54 cents a share for the same period last year. Wall Street analysts had predicted earnings of 2 cents a share.

Fourth-quarter revenue rose 164 percent, from $7 million last year to $18.3 million this year.

The Web software maker, launched five years ago by brothers J.J. and Jeremy Allaire in Cambridge, Mass., has become one of the leaders in e-commerce software, particularly in small and midsized businesses.

"If you look under the cover of any corporation, they're using Allaire's ColdFusion products somewhere," Giga Information Group analyst Phil Costa said.

Making Allaire's accomplishments even more notable is its list of formidable competitors: It competes with Microsoft, Sun Microsystems, IBM, Oracle and dozens of others in the crowded but booming market for application servers. The business is expected to grow from $453.8 million in 1998 to $2.4 billion in 2003, according to a recent study by analyst firm International Data Corp.

In that study, Allaire ranks fourth behind Oracle, Sun and Apple Computer in revenue for application servers, which is software that essentially serves as a traffic cop between Web browsers and back-end computing systems. It runs business software and handles transactions, such as Web surfers' requests to buy goods online.

While other software makers in the market are targeting large businesses, Allaire has differentiated itself by creating lower-cost, easier-to-use tools that small and midsized businesses crave, Banc of America Securities(CQ) analyst Greg Vogel said.

"They're a leading company for small or midsized business, or just Joe Developer, or even in an organization within a major company that wants to build a quick e-business application," Vogel said.

Allaire introduced its popular Web page design software, called ColdFusion Studio, in 1995 and has been branching out to other e-commerce software in recent years.

This summer, Allaire released a software package that lets businesses build and manage Web-based content. The product, called Spectra, includes e-commerce software, such as shopping carts and credit-card authorization, and personalization software, which profiles Web surfers and target information based on their interests.

The company also recently purchased several software companies to build a more powerful application server that supports an emerging programming model called Enterprise JavaBeans.

Allaire was one of four application server companies to capitalize on the Internet frenzy by going public last year. Allaire's stock has more than quadrupled in the past six months, while shares of rivals Bluestone Software and SilverStream Software are hovering in the $100 range. A fourth firm, Persistence Software, recently announced lower-than-expected quarterly revenue and has been mired in the low $20s.

Vogel rates Allaire's stock as a "strong buy" and believes that the company will continue to thrive despite its heavy competition.

"Their revenue growth the last two quarters has been over 170 percent year over year, and their sequential quarterly growth has been close to 30 percent," the Banc of America Securities analyst said. "That's impressive."

For the fiscal year, Allaire lost $2.6 million, or 22 cents a share, compared with a loss of $17.1 million, or 2.20 a share last year. Yearly revenue increased 158 percent, from $21.4 million to $55.2 million.