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InterWorld primed to go public

High-end e-commerce software vendor InterWorld is cutting costs and honing its marketing efforts as it prepares to file for an IPO.

High-end e-commerce software vendor InterWorld is cutting costs and honing its marketing efforts in a push for profitability aimed at filing for an initial public offering, perhaps as soon as April.

InterWorld, based in New York City, has found some success in Asian markets, but the company is not well-known in the United States.

Chris Faust, an InterWorld spokesman, confirmed that eight of the company's 170 employees were laid off last month--seven of them in support functions--but said the company now has an equal numbers of offers on the table for prospective new hires.

"We have been redeploying our head count and streamlining our processes for profitability," said Faust. He added that the company also will outline a new marketing strategy, devised by former IBM and Perot Systems executive Susan Fairty, now InterWorld's marketing VP.

Sources close to the company said executives are deciding whether to file for the IPO quickly or wait until after the rollout of its new marketing strategy, scheduled for the end of March.

An IPO could give InterWorld's high-profile venture investors--including global financier George Soros, Microsoft cofounder Paul Allen, French retailer Carrefour, and investment bank Donaldson, Lufkin & Jenrette--a chance to cash in part of their earnings. (Paul Allen is an investor in CNET: The Computer Network.)

"It could be kind of exciting at this point, given that the catalog marketplace has gotten a lot more visibility of late," said analyst Torrey Byles of Granada Research. "Once you go public, there's a lot of pressure to perform on quarter-to-quarter basis. For single-product companies focused on the Web space, that's hard to do."

InterWorld is the second e-commerce vendor eyeing an IPO this year. For example, Intershop, founded in East Germany but now headquartered in San Francisco, is planning to go public, perhaps in Europe.

"I want to get the brand built," said Fairty. "Our biggest issue is that we have wonderful technology and good customer references, but people don't know about us."

InterWorld's software, called Commerce Exchange 2.0, links Web storefronts to existing back-end systems in large companies and includes a catalog-building tool for creating Internet stores. InterWorld's architecture also lets companies customize the application to conform to its existing business.

"You've got to extend your business process onto the Internet," Fairty said. "The crown jewel is our process-centric components." The product ships with templates to link to legacy systems, but its Process Builder tools and components also let companies customize the software to adapt to existing business processes.

Since arriving at InterWorld in November of 1997, Fairty has added to the company's marketing staff, and has prepared a limited advertising campaign. Although InterWorld has its own sales force, Fairty believes the company needs to use resellers to reach its target markets.

"Our sweet spot is the selling chain, business-to-business-to-consumer," she said. "We will go direct to manufacturers, distributors, resellers, and retailers." Within those markets, InterWorld emphasizes manufacturers of PCs, peripherals, semiconductors, medical supplies, and telecommunications equipment. It also is pursuing ISPs that offer e-commerce and catalog services.

InterWorld competes in e-commerce with Open Market and BroadVision, but Fairty said she worries more about future moves in that space by IBM and Microsoft. Netscape's Merchant System, combined with its e-commerce from Actra, also could become a threat if it overcomes its current malaise.

InterWorld expects to announce distribution deals with KPMG and EDS within a few weeks.

Announced customers include Planet Hollywood Online, Broderbund Software, and Bowne & Company, as well as Multiple Zones International's PC Zone and Mac Zone stores.

InterWorld's software starts at $75,000, but a typical configuration averages $195,000. It runs on the Windows NT and Solaris operating systems and supports Oracle, Sybase, SQL Server, and Informix databases.