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ImproveNet: Will It Ever Get Better for Shareholders?

ImproveNet picked a horrible time to go public. The IPO was priced at $16 per share on March 15, 2000. The stocked opened at $17 and then closed the day at $14.13. Since then, the stock has been a nightmare. The current price is a scary $2-5/8. The market capitalization is $43 million.

ImproveNet is a Web-based system for the home improvement industry. After all, homeowners want qualified service professionals, such as designers, architects and contractors. As for the professionals, they want leads. ImproveNet brings homeowners and service professionals together. This is done using a sophisticated screening and matching technology. But there is more. ImproveNet has other effective uses of the Web, like design tools (you can create your dream home on the Web) and budgeting estimators.

In the last quarter, the company had revenues of $1.2 million, which was a 66% sequential increase and a 363% increase from the same period a year ago. Unfortunately, the company has been losing huge sums. In the past quarter, net losses were $15.3 million. This compares to $17.3 million in the prior quarter.

The market is definitely ripe for a service like ImproveNet. There are more than 900,000 service providers in the US. There are also 70.5 million owner-occupied homes. As any homeowner has realized, getting help is no easy task.

Business model? Well, of course, there is advertising. But the company realizes that this is surely not enough. For example, service providers pay ImproveNet for customer leads. Homeowners pay for premium home improvement online services. Although, these revenues have yet to be significant. But as the services get better, so should the revenues.

In order to survive, the company will need to take quick steps to pare its expenses. The company had $69 million in cash at the end of March.

Keep in mind, though, that the company has strong backers, like GE Capital, Microsoft, Owens Corning and August Capital. As we have seen lately, it would not be surprising to see future support from these backers - especially at the current stock price. This could give the stock a nice short-term boost.