IPO Update: Keynote Systems, Interspeed jump; Webstakes.com wilts
Another day, another round of Internet initial public offerings. Interspeed and Keynote Systems got off to fine starts, Bluestone Software did well, and Webstakes.com came out a first day loser.
Keynote Systems Inc. (Nasdaq: KEYN) moved up 13 1/4 to 27 1/4 in its debut after the largest provider of Internet performance measurement services for e-commerce companies, priced 4 million shares at $14, the top of its raised $12 to $14 price range.
The stock moved up to a high of 23 3/4 in early trading.
Keynote's services are geared toward e-commerce sites, which face a different set of competitive challenges than those faced by conventional 'bricks and mortar' stores. Its estimated price range had been $10-$12 per share.
Citing industry data, about $4.4 billion a year in U.S. e-commerce sales may be lost due to frustratingly slow download speeds and the resulting user abandonment of online transactions.
The company's two main services, Keynote Perspective and Lifeline, measure web site performance and availability, including the time it takes for a user to download web pages.
Its 10 largest customers based on revenues for the nine months ended June 30, 1999 include Hewlett-Packard Co. (NYSE: HWP), Intel Corp. (Nasdaq: INTC) and Microsoft Corp. (Nasdaq: MSFT) according to its filings.
Keynote plans to use the estimated $40.2 million in net proceeds for general corporate purposes, capital expenditures and working capital.
BancBoston Robertson Stephens, Hambrecht & Quist and Dain Rauscher Wessels, have an option to buy 600,000 more shares from the company.
The company's offering, which it expects to raise about $20.5 million is being underwritten by U.S. Bancorp Piper Jaffray. Warburg Dillon Read LLC and Tucker Anthony are co-managers.
Interspeed provides high-speed data communication software based on digital subscriber line, or DSL, technology. The company was formerly a wholly owned subsidiary of Brooktrout, Inc. (Nasdaq: BRKT), and has had 1.5 million secondary shares sold by Brooktrout, Inc., in addition to today's 2 million share offering.
Interspeed had a net loss of $7.1 million on revenue of $1.3 million for the nine months ended June 30, 1999. This compares to a net loss of $3.3 million for the same period in 1998, for which the company did not have a revenue figure in its filings with the Securities and Exchange Commission.
Webstakes.com, Inc. is an online promotion company which uses sweepstakes and contests and direct marketing tools to target its database of about 1.3 million consumers. The company generates revenues through the sale of promotion sponsorships. Webstakes has recently entered agreements with Excite and NBC, and recent clients include CBS Sportsline, Citibank, CDW, Disney and MapQuest.com.
The company had a net loss of $4.4 million on revenue of $3.1 million for the 6 months ended June 30, as compared to a net loss of $248 000 on revenue of $2.3 million in the same period in 1998.
Risks to investors include the concentration of all the company's revenue in the sale of promotion services, which guarantee Webstakes.com's clients a minimum number of impressions. If Webstakes.com can't attract enough eyeballs and the minimum guarantees are not met, Webstakes.com can't collect revenue.
Bluestone Software (Proposed ticker: BLSW) rose 3 3/4 to 18 3/4. The company, which makes Web application server software, priced above its estimated range of $11 to $13 a share. Its shares will begin trading later Friday.
The company had a net loss of $7.5 million on revenue of $6.6 million for the 6 months ended June 30, compared to net loss of $4.5 million on revenue of $3.8 million for the same period of 1998. The company had an accumulated deficit of about $26.4 million as of June 30, 1999.
Deustche Banc Alex Brown in the deal's lead underwriter; SoundView and C.E. Unterberg, Towbin are the co-managers.
Risks cited in the regulatory filings include Bluestone's dependence on its Sapphire/Web software for revenue. Seventy-two percent of total revenues in the first six months of 1999 came from the software, which is based only on Java. The company's success therefore rests on market acceptance of the Java programming language.
The company faces stiff competition from companies including BEA Systems -- which acquired WebLogic -- IBM, Microsoft, Oracle, and Sun Microsystems, -- which acquired NetDynamics and the rights to Netscape's Application Server.
Bluestone also relies on a limited number of customers. Its top ten customers for the six months ended June 30, 1999 accounted for about 66 percent of its revenue. Hewlett-Packard accounted for more than 10 percent of revenue for the year ended December 31, 1998 and OpenConnect made up more than 10 percent of revenue for the six months ended June 30, 1999.