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Internet Content, Infrastructure IPOs Battle For Investor Dollars

The latest common wisdom among Internet stock analysts is that infrastructure companies hold greater promise for investors than content players.

That theory may be tested in microcosm Tuesday with expected IPOs from one Web router vendor and two start-ups that offer online content.

The infrastructure play comes from Ramp Networks, which early Tuesday priced 4 million shares at $11 each to sell under the Nasdaq symbol RAMP. Lead underwriter is BancBoston Robertson Stephens.

Based in Santa Clara, Calif., Ramp's routers are designed to allow multiple users in small offices to share an Internet connection using Digital Subscriber Line (DSL), cable modems, ISDN and analog phone lines. Revenues last year were $9.9 million, a 76% increase over '97's $5.6 million, while losses last year totaled $13.4 million, just 16.5% more than the $11.5 million recorded in 1997.

Despite Ramp's less-than-scintillating revenue growth, the company has managed to land on the short lists of most promising Internet IPOs due out this week. Two reasons: 1) Ramp is targeting the fast-rising SOHO (small office/home office) market, and 2) Its WebRamp product addresses connectivity, or infrastructure, issues.

Investors have greeted networking infrastructure IPOs warmly this spring. Redback Networks went public on May 18, offering shares at $23. Its stock price soared immediately, closing at $84.13. Five days earlier, DSL player Copper Mountain Networks went out at $21 per share, closing at $68.44.

Ramp should debut strongly, though the softer IPO market and its slower revenue growth likely will prevent a moonshot comparable to Redback and Copper Mountain's.

Competing with Ramp and each other will be Salon.com and Netivation.com, each of which offers news, information and opinion on their respective Web sites.

On Monday, Salon.com priced 2.5 million shares at $10.50. The company will trade under the Nasdaq symbol SALN.

Salon's IPO has attracted much attention because it is the first Internet public offering made through lead underwriter W.R. Hambrecht & Company's OpenIPO Web auction site.

The "Dutch auction" site enables any investor to submit bids for shares in pending IPOs, irrespective of the total value of their investment. This process differs dramatically from the traditional method of distributing shares, which is to give large investment funds and insiders huge blocs of stock at discount prices. Wall Street, of course, hates the Dutch auction because it doesn't produce a first-day pop for the privileged fat-cats.

It's hard to predict what will happen here, but if Salon.com's stock performs relatively well, expect to see more Dutch auction offerings this year.

The other content company that may go public Tuesday, Netivation.com, also priced Monday, with 2.5 million shares set for sale at $10 each under the Nasdaq symbol NTVN. Lead underwriter is EBI Securities.

The company runs two Web sites -- one containing political news and information, the other health care. This is a development-stage firm that had no revenues last year and only $82,000 in the first quarter.Expect this premature IPO to languish.


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