Marimba Makes Its Move
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There's nothing like some high-visibility coverage by prestigious Fortune magazine to help build a buzz around your company's pending IPO. That is unless the headline alerting readers to your company in the March 1 issue is "Silicon Valley's Biggest Hype Job."
While competition for this distinction is incredibly fierce, the winner in this case is Marimba, the Internet-based application distribution and management software start-up that on Feb. 12 filed to go public.
Marimba hopes to raise $56.4 million. It could prove to be a good short-term bet. Its debut has not been scheduled and PointCast showed anything can happen when it comes to Internet IPOs.
A host of difficult challenges, however, make Marimba's long-term investment prospects questionable, despite impressive revenue growth in 1998. Among the most critical are:
- Three years since its inception, Marimba still has only one product line, its family of Castanet software, which distributes, upgrades and manages applications over the Internet as well as corporate intranets and extranets.
- The emerging Internet services management software market will quickly move toward commoditization, as large vendors bundle such features into existing products. In other words, it will get hard to make much money in this niche.
- Due to a number of factors, Marimba faces an uphill battle to be taken seriously in the enterprise.
Marimba was founded in early 1996 by CEO Kim Polese and several other members of Sun Microsystems early Java development team. For the entire year the company had no product in the market, but received an incredible amount of attention from the high-tech trade and business press.
In part this was due to the founders' Java pedigree. Marimba was one of the first companies in the $100 million Java Fund started in '96 by venture capital firm Kleiner Perkins Caufield & Byers.
But the biggest reason for Marimba's free publicity ride was the industry and media's adolescent infatuation with the attractive Polese, who was immediately annointed the Glamour Queen of Silicon Valley. Suddenly Polese was everywhere, gracing the covers of industry publications and appearing as a keynote speaker at virtually every major high-tech trade show alongside heavyweights such as Bill Gates, Lou Gerstner and John Chambers.
Kim-mania hit its silly peak in March '97, when Time put her on its list of 25 most influential Americans. At the time Marimba had its first version of Castanet on the market and almost no sales.
If its association with push and Polese's relentless self-promotion weren't enough, Marimba suffered from other marketing problems. The company's name and the name of its Castanet product line certainly were imbued with an unmistakable feminine elan. Unfortunately, the vast majority of its target customers were enterprise managers in need of industrial-strength solutions for their mega-networks. There was a disconnect.
Marimba's revenues in 1997 were a modest $5.5 million. Things improved dramatically last year, as sales of Marimba software and related services zoomed to $17 million. Even more promising, sales increased quarter to quarter in '98.
Marimba at last seems past its hype phase and headed in the right direction.But the market it's playing in probably isn't. Unless it adjusts quickly, Marimba's prospects for long-term growth -- and thus it's attractiveness as a long-term investment -- are dubious.