THE DAY AHEAD: Amid Paradyne buzz, will Wall Street listen to Audible's IPO?

Larry Dignan
3 min read

With a slew of earnings reports, a high-flying broadband company going public and a lot of news to digest, the IPO of Audible Inc. may barely be heard.

The company, which runs a Website offering spoken audio of books, newspapers and magazines, will trade under the ticker "ADBL" Friday. Audible is offering 4 million shares priced at $9, in the middle of its price range of $8 to $10 a share. CS First Boston is the lead underwriter.

But given the IPO of Paradyne Networks (Proposed ticker: PDYN) -- an impressive company (see below) -- and investor fatigue from a wacky week of earnings Wall Street may not want to hear Audible's story, which is still in its infancy.

Audible: Keeper or concept?

Under the Audible service, consumers can purchase and download content, store it in digital files and play it back on personal computers and electronic devices. Audible has its own software to manage the content.

The company features more than 15,000 hours of premium audio content and 3,000 audio versions of books from publishers such as Bantam Doubleday Dell Publishing and Random House Publishing, Simon & Schuster Audio and Time Warner AudioBooks. Audible also features audio versions of The New York Times, The Wall Street Journal and The Economist, and radio programs.

"To our knowledge, no one else currently has digital rights to this content," said Audible in regulatory filings.

A statement like that should make Audible hot. But Audible is sandwiched between the IPOs of Liquid Audio (Nasdaq: LQID) and the upcoming MP3.com, which will be a big hit. Investors may also decide the spoken word isn't as sexy as music. Common sense would dictate that Amazon.com (Nasdaq: AMZN) could offer Audible's wares relatively quickly.

Audible derived most of its sales from its Audible MobilePlayer, a portable unit that would download and play content. Audible has scrapped plans to make its own player, choosing to depend on outside manufacturers, which have experienced delays.

To date, Audible has inked deals with Casio, Compaq, Everex and Philips to bundle Audible software in handheld devices. In addition, the next version of Diamond Multimedia's Rio Internet music player will be compatible with Audible content.

"Those deals will drive the stock," said Francis Gaskins, editor of the Gaskins IPO Desktop. "We've seen these concept stocks before. Drkoop jumps every time there's a new partner. I see Audible announcing more and more partners and doing well in the aftermarket."

Gaskins may have a point. Audible may not have a big bang today, but could follow the stock-gains-through-PR approach to riches.

Audible, like recent IPOs Musicmaker.com and others, is lacking in the revenue department. For 1998, the company reported revenue of $376,000 and a loss of $8.1 million. For the first quarter ending March 31, Audible had sales of $315,000 and a loss of $1.47 million. As of March 31, Audible had losses of $21.2 million since inception.

The competition is also stiff. Audible competes not only on the audio book front, but also on the format front. Aubible's downloads require a browser plug-in, but other competitors such as Broadcast.com use existing streaming media tools such as RealNetworks' RealPlayer or Microsoft's Windows Media Player.

Paradyne's profit

We were shocked and had to check the filings a few times to double check, but there is a tech company going public that has a lot of revenue and even a quarterly profit. Yes, a profit.

Paradyne Networks (Proposed ticker: PDYN), a maker of digital subscriber line products, priced at $17 after bumping up its price range to $14 to $16.

For once, we have to admit Paradyne deserves the run-up it should get today. It's so "old-school." Paradyne actually built up a business before going public. Go figure.

Aside from the usual broadband buzz, Paradyne definitely isn't just another concept IPO. It has 855 employees and revenue that's downright shocking when you look at some of the sales the IPO market has seen lately.

Paradyne's revenue is massive compared to other recent tech IPOs. For 1998, the company reported sales of $198.8 million, up from $181.3 million in 1997. Sales for the quarter ending March 31, were $54 million.

The company also reported a profit, yes a profit, in the first quarter of $2.3 million. Paradyne indicated that it doesn't see the profits lasting, but at least it knows what earnings look like. Paradyne's biggest customer is Lucent Technologies Inc. (NYSE: LU).