RealTime IT News

One Hot IPO May Be In Store

Infrastructure companies have been among the most popular among investors in the past two years because they address a core problem: The need for faster and more reliable connectivity to handle the tsunami of data flooding global networks.

Besides straining the ability of networks to handle the explosion of IP traffic, this tidal wave of 'Net-based information has created another challenge for large corporations drowning in data: Where to store it all.

Helping corporate customers safely warehouse huge amounts of data enabled storage market leader EMC to become one of the biggest successes on Wall Street in the '90s. (On Wednesday, EMC announced its sixth stock split since 1992.)

Indeed, so dominant is Massachusetts-based EMC that it's hard to imagine another data storage company making a splash with an IPO, especially in recent weeks.

But another Bay State data storage player could launch the next ticker moonshot when it goes public. StorageNetworks filed for an offering in early March and already is slated to debut on the Nasdaq exchange sometime next week.

The company hopes to raise $162 million in the offering of 9 million shares, which is being led by Goldman Sachs, also one of its largest shareholders, with a pre-IPO stake of 14.5 percent. StorageNetworks will trade under the symbol STOR. Other investors include Dell Computer and Global Crossing.

Unlike companies such as Exodus Communications (EXDS) , which performs a number of Web-hosting and related services, StorageNetworks focuses exclusively on data storage. Internet companies pay STOR a monthly fee to house and provide easy access to their data, thus freeing up servers and other network assets.

StorageNetworks likens its service and fee structure to that of a utility, differentiating itself from companies selling hardware allowing customers to store their own data and those offering a variety of outsourced services.

With nearly two dozen "co-location" facilities in place already, StorageNetworks plans to expand its fiber-optic network of storage centers to 50 - and double its workforce of 350 - by the end of this year.

Among StorageNetworks' major customers are Lycos (LCOS) , Yahoo (YHOO) and Merrill Lynch. Last year STOR, founded in October 1998, had $6.3 million in revenue and a net loss of $22.6 million.

While its lists of customers and financial backers are impressive, StorageNetworks most valuable calling card is its partnership with EMC, which once employed CEO Peter Bell and several other STOR executives. StorageNetworks bases its storage infrastructure on EMC hardware and software.

With industry giants crowding its list of customers and backers, and with storage equipment market leader EMC in its corner, look for StorageNetworks to be warmly greeted by investors when it goes public - however cold the IPO waters may be.