Another Enterprise Software Company Ready for IPO

The appetite for enterprise software IPOs still is voracious. Yesterday,
SilverStream Software (SSSW), which develops technology that links employees, vendors and partners within the enterprise, soared 15-1/2 to 31-1/2.

Well, there is more this week.

Another to keep an eye on is Agile Software.

The lead underwriter is Morgan Stanley Dean Witter and the proposed ticker symbol is AGIL. The price range is $15-$17.

The company started shipping its products in 1996; as of now, it has about 300 customers. Customers include: Gateway, Texas Instruments, Lucent Technologies and Philips Mobile Computing.

It has become passe for a company, such as a manufacturer, to control all phases of the development of a product. Rather, the trend is towards outsourcing. Take Dell Computer. This company is, in essence, a complex network of several hundred third-party suppliers — joined together by advance technology. The result is an efficient and flexible supply chain.

Great, huh? But this requires an ultra sophisticated technology infrastructure. And this is the specialty of Agile Software.

The company has a Web-based software suite known as Agile Anywhere. Here’s what it does: When a company designs a new product, there is a need for extensive communications with supply chain partners.

With Agile Anywhere, a company can post the specifications of the new product, dividing the requirements into two classes: “buy” or “make.” The “buy” class is for components that are off-the-shelf. As for “make,” this requires extensive specifications, such assembly drawings, machine intersections, schematics, processes, etc.

Next, the software allows all partners in the supply chain to designate their roles, such as testing, delivery, fabrication and so on. Then, the product is ready for volume production. But, the software is still used, such as for product changes (like dealing the component availability and defects). Agile Software calls the system a “dynamic loop, in which members of the supply chain must respond to market-dictated demands while also reacting to information being shared among supply chain partners.”

Interestingly enough, the company has standardized its technology into a protocol, called Product Definition eExchange (PDX), which is based on eXtensible Mark-Up Language (XML).

Below is the chart for the valuation metrics (assuming the IPO is priced at its top range):














































































Agile Software

AGIL

pro forma IPO

 
   

Shares offered

3.00

Price target/actual

$17.00

Proceeds

$51.00

Shares out

19.8

   

IPO market cap

$336.60

less working cap

$55.40

less LTD

0.91

Enterprise value

$281.20

   

1999 Losses

$11.40

Annualized rev.

$16.80

   

Agile Software

 

Revenue multiple

20

Rev. multiple enterprise

17

As with most young companies in emerging markets, Agile Software is losing money. The accumulated deficit stands at $26.5 million.

Revenues, though, have been growing at a rapid pace. In 1997, revenues were $1.3 million; in 1998, $8 million; and $16.8 million in 1999. The revenue base, also, is diversified, with no customer accounting for more than 10% of revenues. The revenue stream involves: licensing revenues, professional services and maintenance contracts.

In fact, the company has an impressive list of venture capital backers: Mohr Davidow Ventures, Accel Partners and Sequoia Capital.

With such credentials and the need for enterprise software, Agile Software should continue to rock the IPO market this week.


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