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CareerBuilder Builds Toward IPO

Online job site CareerBuilder's pending IPO comes hot on the heels of a freshly minted strategic partnership with the biggest name in high-tech - Microsoft.

The deal with Microsoft could give the CareerBuilder initial public offering an added boost when it comes out (possibly any day now) and may give the company a valuable, long-term ally to help it compete in the highly competitive online employment market.

There must be dozens of Web sites specializing in information and listings services for employers and jobseekers - Monster.com, Career Mosaic and HotJobs are among the more well-known. There also are other online sites where jobs can be advertised and found - at portals such as AOL and on corporate sites, where employers post their own openings.

But the potential market is huge. Forrester Research projects the online recruitment market will hit $1.7 billion by 2003, more than 16 times the $105 million in 1998. Which, of course, explains Microsoft's interest.

Until this month, Microsoft was just another corporate customer of CareerBuilder, which offers employers the chance to directly target job candidates in a number of online communities as well as access to the CareerBuilder Network, where they can post job ads.

CareerBuilder claims 645 corporate clients in several industries through March 31, including Bristol-Myers Squibb Co., GTE Internetworking, PricewaterhouseCoopers and Taco Bell.

This month, however, Microsoft became a partner, investing $18 million in CareerBuilder for 1.37 million shares. CareerBuilder will take over development of career sites for Microsoft Network and Microsoft Sidewalk, which will become part of CareerBuilder Network.

Besides extending its network, this move gives CareerBuilder a chance to shine where Microsoft has stumbled - the development of online content. The upside here could be big.

CareerBuilder has an accumulated deficit of $26.2 million through March 31, but the company shows indications that it can grow into profitability. Revenues jumped from $1.9 million in 1997 to $7 million last year, a 264% increase. That pace slowed to 166% in the recent first quarter, when the company reported revenue of $2.8 million, compared to $1.1 million in Q1 '98.

Net losses, meanwhile, rose from $7.3 million in '97 to $12 million last year, a 64% hike. The net loss for Q1 went from $3.1 million in 1998 to the recent quarter's $4.4 million, a 44% increase and a promising trend for CareerBuilder.

CareerBuilder has a well-organized site, good revenue growth, a new key partner and a large market to compete in. It also has a weakness - an over-reliance on the sales force of Automatic Data Processing (ADP), a human resources services vendor.

Sales generated through ADP grew from 21% in the fourth quarter of last year to 34% in the past quarter.

Worse, CareerBuilder is paying out huge commissions on ADP sales - anywhere from 33% to 50%. The contract with ADP is good until January 2002, after which ADP has an option to terminate. CareerBuilder must decrease its reliance on ADP or it could face major problems two years hence.

CareerBuilder hopes to raise $49.5 million in the offering of 4.5 million shares in the $10-$12 price range. Underwriters are Credit Suisse First Boston, BancBoston Robertson Stephens, Hambrecht & Quistand Friedman, Billings, Ramsey & Co. Nasdaq ticker symbol will be CBDR.


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