NetZero gets off to solid start

Free Internet service provider NetZero Inc. (Nasdaq: NZRO) shot up 13 1/8, or 82 percent, to 29 1/8 Friday in its initial public offering.

NetZero priced its 10 million-share offering at $16 a share, the high end of its revised price range of $14 to $16 a share.

The underwriters, Goldman, Sachs & Co., Donaldson, Lufkin & Jenrette, Hambrecht & Quist, and Wit Capital Corp., have been allotted 1.5 million in extra shares in the event of heavy demand.

The Westlake Village, Calif.-based company is hoping to offer free Internet service and make up the revenue shortfall on advertising. NetZero had about 613,000 users accessing its free connection to the Internet in June and delivered 830 million ads to those consumers.

The company plans to use the proceeds raised in the IPO to expand its marketing and sales, boost business by enhancing its server and network infrastructure, fund operating losses and other general corporate purposes, the company said in regulatory filings.

NetZero had about $15.2 million in net losses in the year ending June 30. For the three months ended July 30, 1999, NetZero had a net loss of $8.3 million on revenue of 3.7 million

There are some risks banking the whole future on advertising revenue. "If we are not able to demonstrate to our advertisers that our registered users are actively using our service, advertisers may choose not to advertise," the company said.

While about 1.68 million users had registered for the NetZero service as of August 31, roughly 891,000 used the service during that month.

"We believe that a number of our users have Internet access accounts with our competitors," the company said. "As a result, these users may not use NetZero as their primary Internet service provider.">