RealTime IT News

IPO Gold

Last Friday, Quest Software Inc. (QSFT) surged 33 to 47 on its IPO. The company develops software that allows for the efficient delivery of information across corporate enterprise environments.

Yes, it is not very exciting stuff, but it is critical for companies that want to remain competitive.

This week, there is a similar company going public, SilverStream Software Inc. The company develops a product called the Application Server.

The lead underwriter is Morgan Stanley Dean Witter and the proposed ticker symbol is SSSW. The company plans to issue 3 million shares at a $13-$15 price range.

Here's a look at the valuation metrics (assuming the IPO is priced at $15):



pro forma IPO


Shares offered


Price target/actual




Shares out



IPO market cap


less working cap


less LTD


Enterprise value


1999 Revenues


1999 Losses


Annualized rev.





Revenue multiple


Rev. multiple enterprise


The evolution of corporate information systems has gone through three stages: mainframes, client-server and, as of now, Web-based computing. With mainframes, companies were able to centralize information, but access was limited. As for client-server, employees had access (via PCs), but there was a loss of centralization.

Web-based computing solves the problem -- by allowing centralization and widespread access. Thus, not only are employees connected, but so are vendors, partners and even customers.

Basically, SilverStream's Application Server helps companies build and manage scalable Web-based computing applications.

The user-interface (known as the presentation layer) is easy to use, supporting HTML and Java UIs. Next, there is the Business Logic Layer. Here, the business logic can be programmed easily into the application (such as tax tables, discounts, freight, credit limits). The business logic is held within objects that can be reused in other applications. Then there is the Data Access Layer; it provides seamless connections with a myriad of data sources, such as Oracle, SQL Server and Informix. Finally, there are a rich set of development tools, like visual designers and content management programs.

Estimates show that the application server market is expected to grow from $412 million in 1998 to $2.2 billion in 2002.

The company is losing money, though, with an accumulated deficit of $31.5 million.

But the company has been growing its revenue at furious pace, going from $1.7 million for the first six months of 1998 to $6.1 million in the first six months of 1999. The company has also been successful selling its software overseas ($1.9 million this year).

Revenues for Silverstream come from two main sources: software licenses and consulting services (the software is highly complex and requires lots of TLC).

Critical to any new technology is adoption. SilverStream has not only built powerful technology, but many companies are using it - over 500, which include such heavies as Disney, Federal Express, Pfizer, and MCI WorldCom.

Yes, for SilverStream, it may be a stream of gold.

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