Calico Commerce Prepares for Launch

The common wisdom among high tech investment professionals these days is
that e-commerce companies in general are, along with infrastructure
players, the best bets among Internet stocks.

Specifically, those firms selling Internet-based business-to-business
products and services are the latest Wall Street darlings, though just
about any company that in some way enables e-commerce is greeted
enthusiastically by investors, even if it has a brief operating history
and scant revenues.

Calico Commerce (CLIC), which is scheduled to go public this week, suffers from
neither of those shortcomings.

Five years old, with more than $21 million in revenues in its last
fiscal year and with backing from heavyweight lead underwriter Goldman
Sachs and venture capital firm Kleiner Perkins Caufield &Byers, the
company and its stock are a good bet to ride the next
Internet IPO moonshot.

Calico says it plans to sell 3.93 million shares in the $16 to $18
range. At $18, the IPO would raise $70.7 million.

The company targets large corporations for its sales software, which is
designed for complex products and services. Customers include computer
makers such as Gateway and Dell, networking players Cisco Systems and
Cabletron, Motorola, Nortel and Merrill Lynch.

Calico’s flagship product, eSales Suite, features applications that use
customer input to assess product requirements and purchasing options. If
you’ve bought a computer online through either Gateway or Dell, then you
are familiar with what Calico’s software can do — and it’s a lot.

One area of concern: The annual revenue growth rate has slowed over
three years, dropping from 160 percent to 100 percent to 80 percent from March 1997 to March
1999. And sales growth in the quarter ended June 30 was only 60 percent. Of
course, if that growth rate holds for the rest of the fiscal year,
Calico still will have $34.3 million in revenue in 2000.

Also, Calico has yet to make a profit, though the accumulated deficit of
$34.4 million through June 30 isn’t excessive for a company that has
been around since 1994. (In contrast, online grocer Webvan racked up $35
million in debt in the first half of 1999 alone.)

The bottom line, though, is that Calico appears to be a solid e-commerce
player with enough revenues to give it some real weight. Though the
declining revenue growth is worth keeping an eye on, I expect a feeding
frenzy on IPO day. And probably for good reason.

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