A raft of Internet services companies have filed to go public
in recent weeks, all hoping to become the industry's next success
In the past two months, newcomers including New York-based Razorfish,
Atlanta-based iXL, and Reston,
Virginia-based Proxicom, have filed
for initial public offerings.
In the meantime, Viant, formerly known as Silicon Valley
Internet Partners, is rumored to be planning an initial file soon. Upstart
Scient, however, which lured prestigious
board members and CEO Robert Howe from IBM's financial services consulting
practice, remains privately held.
"Everyone wants to be the next USWeb," said Stan Lepeak, analyst at
Stamford, Connecticut-based Meta
Group. "And then there's the opportunity to become really rich on an IPO. It's as
much about cashing out as it is about building a firm."
Though several of these companies are losing money now, they are backed by
heavyweight Wall Street firms buzzing about the big bang from their IPOs
amid a Web services market that Cambridge-based Forrester Research
estimates will reach $16 billion by 2002.
"From an investor's standpoint this isn't a zero-sum game like investing in
software," said David Rauktys, vice president of investment banking at FAC
Equities, the investment arm of Boston-based First Albany. "Services firms
are going to win."
IXL, which has grown quickly through acquisitions, is
Merrill Lynch, Donaldson, Lufkin & Jenrette, BancBoston Robertson Stephens,
and NationsBanc Montgomery Securities, and plans an IPO of $86 million in
common stock. The company has applied to trade the stock on Nasdaq under
the symbol "IIXL."
Razorfish, a subsidiary of New
York-based advertising firm Omnicom Group, is underwritten by a group led
by Credit Suisse First Boston. The company estimated it would raise $50
million with its offering. Omnicom holds a 37.7 percent stake, or 15.9
million shares of the company, while Swedish firm Spray Ventures AB holds a
37.5 percent stake.
Proxicom, which filed to go public last week, is working with underwriters
led by BT Alex. Brown, Prudential Securities, Thomas Weisel Partners, and
Friedman, Billings, Ramsey & Company.
This new generation of smaller consulting firms move beyond the offerings
of traditional Web design shops, rolling together traditional management
consulting, the design work of creating sites, the integration functions of
building a corporate infrastructure that can scale to huge numbers of
users, and the outsourcing capabilities of running it all for a client.
While these companies on their own do not provide all pieces of the
picture, their Internet services are expected to fill a growing niche--akin to what successful firms, like Cambridge Technology Partners, have provided
to companies making a transition to client-server technologies, analysts say.
"Demand for these services will outstrip the supply over the next couple of
years," said Ken Allard, analyst with Jupiter Communications in
"The outlook for the need for professional services looks good for the next
three to five years."
To IT services giants--including Electronic
Data Systems, Computer Sciences, and
IBM Global--these small companies are more
of an annoyance than a threat, analysts say. Larger firms will likely
partner with or buy the smaller players to get what they need to fill out
their Web strategy.
Bloomberg contributed to this report.