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Software company GraphOn goes public

The company, which sells software to help companies Web-enable their programs, takes an unusual route in going public.

GraphOn, a company that sells software to help companies, including Sun, Web-enable their programs went public this week--but not through the usual route.

Instead, GraphOn used a "reverse merger" under which GraphOn was acquired by Unity First, a "special purpose acquisition corporation" or SPAC, said GraphOn chief executive Walt Keller.

SPACs are shell companies that exist as a vehicle to take other companies public. Unity First, which trades its stock over-the-counter, has no employees and will vanish once GraphOn qualifies to trade on the Nasdaq market. The deal, however, brought $23 million to GraphOn, which will use the funds for development purposes.

GraphOn chose the reverse merger method because it reduced risks, uncertainties, and fees of the traditional initial public offering process, said executive vice president Robin Ford. "We knew how much we would raise. There was no risk involved," she said. Going public through the merger cost a total of about $800,000, the company said.

The biggest problem, though, is that by bypassing the traditional IPO method it was harder to get the attention of financial analysts, the professionals who monitor publicly traded companies for a living.

"The No. 1 complaint is that it will require us to do a significant amount of work to get analyst coverage," Keller said. In addition, the method bypasses the surging stock price and commensurate media splash that sometimes occurs on the first day of public trading.

Unity First currently is traded over the counter under the symbol UFAC, but when Nasdaq trading begins, GraphOn will trade under the symbol GOJO, the company said.

GraphOn makes software that allows programs to be run on centralized Unix servers with users connecting over the Internet or other network connections. The software is tailored for a world where Java or Windows-based "thin clients" connect to servers that do the heavy lifting of the computational realm.

GraphOn aims its "Go" products at software companies that want to build the Internet into their products, Keller said. One market is companies such as SAP that sell enterprise resource planning (ERP) software, many of which are incorporating a new model in which they rent use of their software over a network instead of selling the software to a company.

Every major software company is evaluating this so-called "application service provider" (ASP) model and using GraphOn software can help them accomplish the move faster, Keller said. Market research firm International Data Corporation has predicted that ASP business will grow to be a $2 billion business by 2003.

But the biggest revenue so far for GraphOn has been with hardware makers such as Sun Microsystems and IBM who have licensed the software as a way to make their own network computers work better, Keller said.

GraphOn's software is used in Sun's i-Planet software, which lets people with browsers access desktop applications from a wide variety of devices across the Internet. Sun uses the software itself and began selling it in April.

"We are the way to get to Solaris applications from i-Planet," Keller said.

IBM includes GraphOn software along with its recent versions of its AIX operating system, Keller said.

Another adopter of GraphOn software is Corel, an investor in GraphOn, which has licensed software so its WordPerfect for Linux software can be run on a central server with Java-enabled clients actually doing the word processing.