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Tech Industry

Intellesale postpones IPO, cites market conditions

    Intellesale.com (Proposed ticker: SALE), an online reseller of new and used computer equipment, said Wednesday it was postponing its IPO due to poor market conditions.

    Intellesale had planned on offering 5.7 million shares to be priced between $8 and $10 each. Ladenburg Thalmann is the lead underwriter for the deal, with Punk Ziegel acting as a co-manager.

    One of its competitors, Buy.com (Nasdaq: BUYX) has plans to go public next week.

    For the nine months ended September 30, Intellesale's net loss was $593 000 on revenue of $87.9 million, compared to a net loss of $1.1 million on revenue of $43 million for the same period in 1998.

    Intellesale did have a few lingering questions. The company launched its Internet business in the second quarter of 1998 with the acquisition of Data Path Technologies. Internet revenue were $31.4 million, or 35.8 percent of total revenue, for the nine months ended Sept. 30.

    The company also has a strange settlement agreement with FlashNet, the result of a lawsuit that arose when Intellesale allegedly botched a free-PC plan. FlashNet, which recently sold out to Prodigy (Nasdaq: PRGY), planned to offer free PCs to new members that signed up for a two- or three-year Internet access. FlashNet contracted with Intellesale to deliver the PCs. The plan backfired when customers had trouble receiving the PCs. FlashNet sued Intellesale, but the two companies settled with neither admitting any wrongdoing.

    Under the agreement with FlashNet in June 1999, Intellesale recognized about $9.9 million in revenue through September 30, 1999. FlashNet discontinued its program in November as part of a settlement of litigation initiated by FlashNet against Intellesale. Under the settlement, FlashNet will include an Intellesale promotional disk or pamphlet with the computers it has shipped, and Intellesale will compensate FlashNet for this promotion at the rate of $300 per computer shipped.

    However, competition may have derailed the Intellesale IPO. The company has a lot of competitors in the computer sales department, including manufacturers of computer equipment such as Compaq Computer (NYSE: CPQ), Dell Computer (Nasdaq: DELL) and IBM (NYSE: IBM), which offer both refurbished and new equipment through their websites. Intellesale also competes with traditional store-based computer retailers, such as Best Buy Inc (NYSE: BBY), CompUSA (NYSE: CPU) and online competitors, such as Cyberian Outpost (Nasdaq: COOL), Egghead.com (Nasdaq: EGGS), Value America (Nasdaq: VUSA) and soon to be public Buy.com (Proposed ticker: BUYX).