RealTime IT News

To Launch Or Not to Launch?

In the wake of numerous flameouts, the Internet IPO market essentially has been grounded, with postponements coming almost daily and only one launch slated for this week.

And we may not even see that IPO, from XML portal server provider Sequoia Software, should company executives and lead underwriter Lehman Brothers opt to wait for better conditions, whenever they might come.

Already they've scaled down the offering by lowering the price range from the original $11 to $13 per share to $9 to $11 per share. With 4.2 million shares, the net proceeds from the IPO will be $37.6 million, rather than $45.4 million.

Still, there's something to be said for having the spotlight to yourself. Throw in a hot technology (extensible markup language, which is gaining in popularity) and a highly coveted target market (B2B), and Sequoia could be in for a lofty first-day ride under the Nasdaq symbol SQSW.

But investors no longer respond in Pavlovian fashion to every tech buzzword (remember Linux and Java?), nor do they automatically assume that every B2B play will be a wealth-generating winner. They're into viable business plans and blueprints for profitability. At least for now.

Sequoia believes it has what newly skeptical investors want. Based in Colombia, Md., the company makes what it calls the first and only XML-based Internet infrastructure software that allows companies to create their own interactive e-business portals.

Corporate portals go beyond company Web sites because they enable users to tap more deeply into corporate information resources to exchange data. XML is a more flexible language than its predecessor, HTML, and not only collects data from disparate sources, it allows users to interact with the original information source.

Sequoia's revenues in 1999 were $8.4 million, an increase of 109 percent over sales in the previous year. But while revenues more than doubled, net loss skyrocketed last year to $12.8 million from $3 million in 1998. Through last year, Sequoia's accumulated deficit was $26.6 million.

While XML may have been adopted as an Internet standard, it does not yet enjoy widespread use, as Sequoia points out itself in its S-1 filing. "If broad acceptance for XML does not develop," the company warns, "our business could be harmed."

That's probably an understatement. The bottom line is that investors in this offering are being asked to make two big bets: 1) That Sequoia can overcome competition from companies such as Open Market , Oracle and BroadVision and move toward profitability, and 2) XML won't be usurped by another technology.

For me, that's at least one gamble too many.


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