Corio, which in April filed with the Securities and Exchange Commission for its IPO, intends to sell 10 million shares at $14 per share. The San Carlos, Calif.-based company is aiming to raise up to $140 million in the proposed offering.
The offering is being led by Goldman Sachs and co-managed by underwriters Merrill Lynch, Robertson Stephens and Epoch Securities. The company expects to trade on the Nasdaq under the ticker symbol "CRIO."
Corio competes in the nascent but lucrative application service provider (ASP) market against rivals USinternetworking, Breakaway Solutions, MarchFirst, FutureLink and others. ASPs manage, implement and remotely host business software from a data center, ridding its clients of having to deal with software installations and upgrades that tend to be complicated and expensive.
While most so-called pure-play ASPs have yet to turn a profit, a number of research firms have projected huge growth in the market for application hosting services.
Market research firm Giga Information Group pegs the ASP market to reach between $2 billion to $6 billion by the end of 2002.
Meanwhile, the IPO market, particularly for technology firms, has been in a slump in the past few months due to the overall technology correction that battered the Nasdaq and sent business e-commerce stocks tumbling. But analysts have said the IPO market is slowly regaining steam.
"The IPO market is showing signs of a pick-up," said David Mahoney, a financial analyst at Wit Soundview. "The IPO market dried up significantly for e-commerce (companies) that weren't changing a business problem. These (ASPs) are changing real IT business problems. The IPO market is looking good for companies that have tangible technology solutions as opposed to just an e-commerce Web site. That wave is definitely over."
Mahoney said this upbeat momentum could mean good timing for Corio, which has a strong business model and has been successful in building a name for itself in the ASP market.
Like other competitors in the growing market, Corio will be faced with the challenge of articulating its business model and bolstering its services to capture more high-profile clients, Mahoney added.
To date, Corio rents business applications from software makers including PeopleSoft, SAP, Commerce One and BroadVision. Corio charges customers on a per-month, per-user basis and typically forms a three-year service level agreement with its clients.
Giga analyst William Sheehan said while some investors may shy away from Corio's coming out, especially since the company may not turn a profit any time soon, Corio's strong business model and strategy going forward could mean a successful offering.
"They are responding to the market better than many ASPs by really becoming a full-service provider," said Sheehan, noting the recent outsourcing pact Corio struck with consulting firm Ernst & Young. "Corio and others have taken steps to provide so-called bundled services through partnerships and alliances."
Corio has been busy extending its application hosting services to cover broader ground other than software-for-rent, he added, which is where most ASPs should be heading toward. Under the Ernst & Young alliance, the companies said they will offer several business applications such as e-commerce, procurement, manufacturing, customer support and finance under Corio's application rental model combined with Ernst & Young's consulting and systems integration services.
Boston-based Breakaway Solutions, for one, pitches itself as a full-service provider, offering companies application hosting services as well as help building their Internet strategies. The company, which went public last October, more than tripled in its first trading day. MarchFirst has a similar set of services.
Corio, which is led by former Oracle executive George Kadifa, said in its April filing that it has incurred "significant" operating losses and has yet to turn a profit. The company said it expects to use part of the proceeds from the IPO to repay outstanding debt of approximately $10 million under a loan agreement to computer services firm Comdisco.
The company said additional net proceeds from the offering will be used for working capital and general corporate purposes such as marketing and sales efforts, research and development, expansion and possibly acquisition of or investment in other complementary businesses, product lines or technologies.