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IPO Profile: DigitalThink

Education no longer stops with college or graduate school; rather, it is becoming a life-long process. With the world changing so rapidly, it is imperative to have an educated workforce. In order to stay competitive, companies are, in a sense, becoming learning institutions.

However, education can be costly. You need instructors, classrooms and time. According to the Department of Education, businesses spent about $55 billion on in-person, instruction-led training in 1997.

But the Internet offers a cost-effective solution. So-called e-learning applications can be highly automated, offered on a 24/7 basis and even fun for students. The technology can track the student's progress and isolate weaknesses that need improvement.

A leader in the e-learning field is DigitalThink a company expected to go public this week. The lead underwriter is CS First Boston and the proposed ticker symbol is DTHK. The company plans to issue 4.4 million shares between the price range of $10-$12.

Originally, the company focused on information technology courses but has expanded into other fields, such as finance, healthcare, and telecommunications. Its technology is top-notch. DigitalThink uses advanced tools to allow for interaction with tutors, as well as automated instructional content.

The company started in April 1996 and had $200,000 in revenues in its first year of operation. Revenues exploded to $6.5 million in the first nine months of 1999. The company relies on a small number of customers, though. About half of all revenues come from five customers, including KPMG, which accounts for 34 percent.

Yes, the company is losing a tremendous amount of money. The accumulated deficit is $34.1 million. But DigitalThink is backed with smart money. Venture capitalists include TI Ventures, Adobe Ventures and H&Q Ventures.

The future of e-learning looks promising. According to International Data Corp., the market is expected to grow from $550 million in 1998 to $11.4 billion 2003. So long as DigitalThink continues to get more content and customers.