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ClientLogic: Does This IPO Make Sense?

As many companies before them, ClientLogic strives to help businesses to expand their Internet capabilities by managing their customer relationships.

As for ClientLogic, it wants to do virtually everything: marketing, customer contact management, and fulfillment.

The price range is $14-16, the lead underwriter is Salomon Smith Barney, the eManager is DLJdirect and the proposed ticker symbol is CLGC.

While reading the companys prospectus, I found their mission statement: "ClientLogic is an international provider of marketing, customer contact management and fulfillment services focused on electronic commerce and technology companies." To me, this sounds unfocused. Can a young company be a global provider of comprehensive services to get companies on the Web? I think not.

However, as you look closely at the company, it is really a call-center organization. These services are available to their clients 24 hours a day, seven days a week, in 11 languages through 33 facilities located in 10 countries. During December 1999 ClientLogic responded to an average of 125,000 customer inquiries each day and responded to approximately 1 million e-mails in 1999.

Even though ClientLogic is designed to target e-commerce and technology clients, in 1999, a majority of their revenues came from companies that were not Internet related, or provided services unrelated to their clients' e-commerce activities. Not only that, during 1999 approximately 86% of their customer contact was conducted by the telephone.

No doubt, the market for e-commerce customer service is big. Jupiter Communications estimates that, as of September 1999, 44 percent of e-commerce Web sites lacked real-time integrated call center support, 46 percent lacked real-time integrated inventory management systems and 41 percent lacked real-time integrated fulfillment systems.

ClientLogic had net losses of $61.1 million in 1999 and approximately $118.5 million of the proceeds from their offering are intended to repay indebtedness. Their debt in 1999 is due in part to the acquisitions of LCS Industries, Inc., Cordena Call Management B.V., Groupe Adverbe International S.A., and MarketVision, Inc. ClientLogic also acquired a portion of the assets of Canadian Access Insurance Services Inc. and formed a subsidiary, InsLogic.com Corp., to perform insurance related services.

Total revenues rose quite impressively from $27.2 million in 1998 to $177.8 million in 1999. It takes a lot of money though to run customer contact management centers, and pay salaries for more than 7,000 employees, not to mention management salaries.

Hopefully, for ClientLogics sake, and the $253 million they expect to raise for their IPO will be enough to do more than pay off their debt.