Blistering Gains: Internet IPOs Sizzle On Wall

You know that the stock market is hot when investors call a 47% gain for an
Internet
initial public offering a bad day on Wall Street. The numbers playing out
in the IPO screen are blockbusters by any gauge. Our tally shows an average
140% runs from offering.


The dash for cash prompts many Internet hopefuls to file for offerings
also in the race
for marketshare and mindshare in several of the Web’s new categories
including retailing
and local guides.


Fueling the activity are those looking for the next Amazon.com and day
traders who buy
and sell shares in video vigilante ‘Duke Nukem’ fashion (thumb twitching
cowboys).


See How They Run: Four Recent Net IPOs



















































Offering
price

Close June 29

% difference

Broadcom

BRCM

$ 24.00

$ 69.88

191%

Inktomi

INKT

$ 18.00

$ 41.00

128%

NetGravity

NETG

$ 9.00

$ 13.25

47%

Software.net

SWNT

$ 9.00

$ 19.69

119%

AVERAGE

$ 15.00

$ 35.95

TOTAL

$ 60.00

$ 143.81

140%



Broadcom (NASDAQ:BRCM) leads the pack with 191% upside from pricing (see
June ISR archives June for Broadcom report). Fueling its ozone-leading
orbit is the rush by telco and techno
firms investing in cable.


Anecdotal evidence comes from AT&amp
;T’s $48
billion
bid for cable king TCI, and Microsoft’s billion bets on
Comcast. Even Compaq jumped in the coaxial wired war with an investment in
cable.


Who’s supplying the fast chips for that broadband nirvana mantra humming
from these
deals? Broadcom, for one. Our shorthand version of Broadcom’s potential:
this could be the
‘Intel’ of the Internet on steroids era playing soon on PCs and TVs.


On the other side of the need for speed comes Inktomi (NASDAQ:INKT),
which provides
software that saves copies of popular Web pages on servers–caching.
Inktomi also provides
search engine technology to several high-profile Web companies including
Yahoo!, Microsoft,
Disney and Wired (see ISR archives June
12
for Inktomi
report).


Software.net (NASDAQ:SWNT) first quarter 1998 generated $6.2 million in
revenue selling
software via the Web through downloads and shrink-wrap fulfillment. Since
launch in 1994
more than 140,000 customers have tried and bought from Software.net’s
assortment of 300
software publishers and 2,800 titles. Key marketing alliances include AOL,
Excite and
Netscape.


NetGravity (NASDAQ:NETG) sputtered to a start, pricing
below high range as the market debated where the ad software server maker
fit into the overall big picture (see ISR archives May
22
for NetGravity report). It managed a 47% run once the engine kicked
in.


In The IPO Pipeline



























The IPO
pipeline

Target
price =

Broadcast.com

$ 12.00

Citysearch

TBD *

Digital River

TBD

PointCast

$ 11.00

*to
be determined



Investor enthusiasm for these prompts more firms to step into the
on-deck circle.
PointCast is one (see ISR archives May
19
for PointCast
report) that looks to price at $11 per share. And here comes Web broadcast
aggregator
and aptly-named Broadcast.com, in a similar range at $12.


Digital River, a rival to software.net, hasn’t priced the offer yet but
has filed to go
public. Our analysis shows software.net could be trading at about 17x
estimated 1998
revenue, so we would expect Digital River to try and find that height. The
twist on
Digital River is that it sells software through a network of 274 online
retailer clients,
including Corel Corporation, Cyberian Outpost, Lotus, Micro Warehouse and
Internet.com to
name a few. (see ISR archives June
4
for Cyberian
report).


Citysearch becomes the first local guide to the Web to test the IPO
pipeline. No share
price target yet but it wants to raise $50 million. The guide serves
several U.S. metro
areas including Austin, Greater Los Angeles, Nashville, New York City,
Portland, Raleigh,
Durham, Chapel Hill, Cary, San Francisco Bay Area, Utah and Washington DC.
International
cities featured are Melbourne and Sydney. Look for our in-depth report on
Citysearch this
week in Internet Stock Report.

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