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Priceline, Intraware Stepping to Plate

On Tuesday, we looked at pcOrder.com, one of three e-commerce companies scheduled to price IPOs this week. Today we'll look at the other two.

Name your Priceline.com

Imagine a world in which you can buy the new vehicle you want at the price you want to pay, and you don't even have to talk to the dealer except to arrange for pickup of your new wheels.

Utopian madness, you say? Perhaps, but that's what priceline.com promises customers who use its Web site to purchase new cars and trucks. Customers simply "name their price" for a specific vehicle and priceline.com searches its databases for a willing seller. Special undercoating never even comes up.

The Stamford, Conn. start-up is betting on its "buyer-driven commerce" transaction model with an ambitious IPO it hopes will raise $115 million when it debuts March 8. Underwriter Morgan Stanley has yet to announce the number of shares to be offered or the asking price.

Priceline.com also sells leisure airline tickets -- its biggest revenue generator by far -- and books hotel rooms in major U.S. cities.

Last month it began offering "name your price" service for home mortgages, home refinancing and home equity loans. Consumer services such as insurance, telecommunications, cruises, rental cars and credit cards are planned for down the road.

Since opening its Web site last April, the company has racked up revenues of $35.2 million through December, including $30.4 million from airline ticket sales. Not bad work in nine months.

The downsides are losses of $94 million since the company was formed in July 1997, due to heavy costs of branding, marketing and systems development.

A major risk facing the company is its over-reliance on airline ticket sales. The airline ticket market is rife with cutthroat competition from a number of sources, including travel agencies, wholesalers and Internet travel agents such as Microsoft's Expedia.com.

Further, not only have 95% of priceline.com's airline ticket sales come from just three airlines, the company reports that "a substantial portion" of airline tickets have been sold below cost. You can't use loss leaders indefinitely, especially if they're your prime revenue generator.

Priceline.com's IPO will give it plenty of money for its marketing ramp-up. If the company is to succeed, much of that effort must go toward broadening its revenue base beyond airline ticket sales.

Intraware's intranet play

Three-year-old Intraware wants to be the online Consumer Reports (and purchase) service for IT professionals.

The Web site of the Orinda, Calif.-based company offers prospective buyers a chance to research, evaluate, buy and upgrade software products from a current roster of about two dozen vendors, including Netscape, Sun Microsystems, Informix and RealNetworks.

Intraware is slated to go public Thursday, pricing 4 million shares between $13 and $15 in the hopes of raising $56 million.

The company's services include IT Knowledge Center, where IT pros can evaluate software; intraware.shop, the "try and buy" section of the site; and SubscribNet, which keeps members informed about software updates and licenses.

The company has top-flight leadership in President and CEO Peter Jackson and Chairman Mark Hoffman, co-founder of database software giant Sybase and currently CEO of e-commerce start-up Commerce One.

Revenue growth in the past year has been impressive as well, with the fiscal 1998 total of $10.4 million shooting up to $24.6 million in the three quarters that ended last Nov. 30.

But in those numbers lurks danger, for more than 90% of that $24.6 million in recent revenue comes from transactions with Netscape and the sale of Netscape products.

AOL's purchase of Netscape, and its side deal allowing Sun rights to sell Netscape software, is the wild card in this deck. How it plays out could have a huge impact on Intraware's prospects. It may be months before the picture becomes clearer.



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