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E-Commerce for the Big Boys

With the summer vacations, the IPO market has been nonexistent. But in a few weeks, things will start heating up again.

One IPO to look at is Calico Commerce.

The company is quite old by Net standards, starting in April 1994. In fact, never in its history has the company generated any profits. So far, the accumulated deficit is $34.4 million.

Four of its customers account for 52 percent of revenues and ten customers account for 81 percent of revenues. Then again, this is normal, since Calico's software is geared for big companies. Most of its contracts are in excess of $1 million.

Here are the valuation metrics (assuming the IPO is priced at the top of its current range):

Calico Commerce

CLIC

pro forma IPO

 
   

Shares offered

3.90

Price target/actual

$14.00

Proceeds

$54.60

Shares out

32.7

   

IPO market cap

$457.80

less working cap

$71.00

less LTD

0

Enterprise value

$386.80

1999 Revenues

$13.10

1999 Losses

$9.60

Annualized rev.

$32.00

   

Calico

 

Revenue multiple

14

Rev. multiple enterprise

12

Some History

In the past 20 years, corporate America has spent billions on enterprise resource planning and sales force automation -- to create efficiencies, as well as sales.

Unfortunately, these systems do not use the Net, so the benefits have been limited to a small number of users. What's more, the technology tends to be inflexible and proprietary.

But as for Net solutions, these allow for efficient transactions between customers, resellers and partners. But despite the advantages, companies do not want to throw-away their legacy systems.

One solution is Calico's software.

The software, though, is not for selling such things as books or CDs. Rather, Calico specializes in complex products or services.

The hub of Calico is the eSales Configurator. Basically, this expert system optimizes customer requirements with product attributes. That is, giving the customer what he or she wants.

The software calculates such things as the trade-offs of price, performance and many other complex variables. In a sense, the software is an automated sales rep.

The software is relatively easy to configure using the standards of XML (extensible markup language).

One happy customer is Nortel, which uses Calico software to sell its high-priced complex telecom equipment. Other customers include Dell, Merrill Lynch and Cisco.

Conclusion

The future looks bright for Calico. The market for ecommerce-enabling software is expected to grow from $235 million in 1998 to $3.8 billion in 2002 (according to Forrester Research).

Yes, as has been the case with other enterprise software IPOs -- such as Quest Software (QSFT) , Agile Software

(AGIL) , and Silverstream Software (SSSW) ) -- Calico should be strong.

Maybe that's why Kleiner Perkins invested in the company and that Goldman Sachs is the underwriter of the IPO.


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