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Loudcloud tries to emerge from IPO shadow

Executives of the Net infrastructure company defend the IPO and boast of new initiatives that may quell lingering concerns among some investors.

In their first extensive comments since last month's disappointing initial public offering, executives of Net infrastructure company Loudcloud defended the IPO on Tuesday and boasted of new initiatives that may quell lingering concerns among some investors.

At a New York press conference called to announce a new set of services tailored to large corporations, Loudcloud Chairman Marc Andreessen and CEO Ben Horowitz also spent considerable time defending the IPO.

Although the share offering added $140 million to Loudcloud's coffers, the company had to give up about twice as much equity as was initially hoped. Meanwhile, the company has a quarterly cash-burn rate in excess of $38 million.

The stock price has fluctuated a bit below its initial offering of $6, but has recently rebounded to about $5.70.

Despite investors' tepid reception to the IPO, Andreessen said the Wall Street disappointment did come with a silver lining, since it effectively blocked any competitors from tapping the public markets. "We not only closed the window," said the co-founder of former Net highflier Netscape Communications, "we blew up the bridge behind us. I think we might have nuked the whole continent."

Predictably, Andreessen and CEO Horowitz also emphasized that the company has enough money to make it through the next stage in the business plan. But any other competitor trying to reach the same level of operation will have trouble.

Loudcloud is the most visible in a long list of Net infrastructure companies with business plans that require large investments in a market where new funding has become scarce. Loudcloud and other companies are struggling to convince potential customers not only that they can fulfill promises to host and manage Internet services, but that they won't wind up following some of their own dot-com clientele to bankruptcy court.

To that end, the company's high-profile event for analysts and press in New York--home of Wall Street and old-world corporate headquarters, rather than the technology world's center--was an attempt to spotlight its focus on big corporate clients.

The executives announced two new services along these lines. Where previously it had supported companies' Web operations that were hosted in data centers such as Exodus' or AT&T's facilities, Loudcloud will now bring its monitoring, backup and support services to facilities owned and operated by the corporate customers themselves.

Loudcloud executives said individual companies maintain about 10 times as much internal computer data than commercial data centers do, producing a significantly larger potential market for the start-up's services. Outside analysts couldn't immediately confirm that number but said the approach is nevertheless a good one.

Loudcloud executives said they do not have any of these private data-center customers in trial services but are in talks with several large potential customers.

Loudcloud also intends to help bring companies' internal databases onto the Web, working with consulting partners including Accenture. Other companies in the "managed service provider" business are also moving down each of these paths, analysts said.

Whether Loudcloud can attract enough large companies to defray the rate it is burning through cash is still an open question, analysts say. It is in a relatively better position than many of its newer competitors, with the infusion of cash from even a painful IPO behind it. But it's a difficult market for any company that needs to spend an enormous amount of cash to gain it back.

"A lot of these companies are running out of money," Lewis said.