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Tech Industry

Tech IPOs outdo other issues

Online ad agency DoubleClick gains 57 percent on its public debut, joining the list of technology offerings that have outperformed other issues.

    Online advertising agency DoubleClick (DCLK) leaped into the public market today and gained 57 percent upon its debut, joining the list of technology offerings that have outperformed other IPOs.

    The stock, which underwriters priced at $17 per share, opened this morning at 29-1/4, up 72 percent on its first trade. It soared as high as 31-3/4 before pulling back to close the day at 26-3/4.

    DoubleClick is the latest example of the success that tech IPOs have experienced in the new year--outperforming non-tech issues by more than 500 percent.

    Helping to drive investor excitement this year is the success of several large technology companies that have rebounded from last year's losses and posted results above Wall Street's expectations. The Dow Jones Industrial Average, meanwhile, continues to break records, and portfolio managers are once again turning their attention to small caps and tech IPOs.

    Other recent examples of booming technology offerings include online music retailer CDnow (CDNW), which set a target price of $16 a share, then jumped 37.5 percent on the first trade of the day, closing at $22 a share. Digital certificate company VeriSign (VRSN) also hit the public market with a bang, gaining over 80 percent from its target price.

    "There are fewer [technology] deals getting more attention," said Richard Peterson, an IPO analyst at Securities Data. "It all has to do with supply and demand."

    So far this year, there have been only 12 technology deals, down from a flurry of deals forged during this same period a year ago, which saw 32 tech IPOs.

    Despite the decline in volume, the price performance for tech IPOs has outshined that of other industries. The average tech IPO is up 27 percent so far this year, excluding today's launch, which will further bolster the average. By comparison, non-tech IPOs are up 5 percent.

    Some issues have shown extremely strong performance even after their public debut. VeriSign, for example, is up 114 percent since it was launched on January 30.

    Peterson said all but one of the tech deals has showed gains since its IPO. Driving this favorable acceptance of technology offerings, he added, is the strong earnings performance of bellwether technology stocks like Dell (DELL), Intel (INTC), and Compaq (CPQ), and even Oracle (ORCL), which has been rebounding of late.

    "It is just a rising tide," said Peterson.

    Small caps also are poised for a comeback, after lagging behind the S&P for the past 12 months, Peterson said, noting that managers perceive large caps to be overvalued given the Dow's record levels.

    DoubleClick floated out 3 million shares, raising a total of $51 million. The company upped the number of shares from 2.5 million, and the target price was upped to $17 a share, from its previous range of between $12 and $14 per share.

    The company reported revenue of $10.9 million for the December quarter, compared with revenues of $3.8 million a year ago and $8.2 million for the previous quarter. Net loss was $3.8 million, compared with a loss of $1.7 million a year earlier and $2.3 million during the previous quarter. The company anticipates that it will continue to incur operating losses at least into 1999, as it builds out its business.

    Ads delivered on the Web sites of the top four Web publishers on the DoubleClick Network accounted for approximately 61.2 percent of the company's revenues for the year ended December 31, 1997, according to a filing with the Securities and Exchange Commission.

    The company anticipates that a substantial portion of its future revenues will be derived from ads delivered on the Web sites of a limited number of Web publishers.

    AltaVista, a subsidiary of Digital Equipment (DEC), made up 44.7 percent of the DoubleClick Network's revenues for the year ended December 31, 1997. DoubleClick expects the search engine to continue to account for a significant portion of its revenues over the next few years.

    However any reduction in traffic on the AltaVista Web site, or a termination of AltaVista's contract with the company, would have a material adverse effect on DoubleClick's business results, operations, and financial condition.