One reason the Internet stock market is so exciting these days is because almost everybody knows the thrill ride won’t go on forever.
And that’s because any large disconnect between a company’s market valuation and its real value (as a function of revenue growth and profitability) can’t last.
That’s what hangs over all talk about the many overvalued Internet
stocks in our midst. They are like child prodigies, given all sorts of
unwarranted credit for extraordinary deeds not yet accomplished. Of
course, sooner or later child prodigies are expected to perform.
For now, though, the day is young and many can dream of greatness. One
place where there is plenty of room for ambitious dreams is in
e-commerce.
Three different e-commerce companies are expected to price IPOs this
week. All are targeting different markets with disparate strategies. All
have promise. We’ll look at one of them today and the other two
tomorrow.
pcOrder.com
Based in Austin, Texas, pcOrder.com sells software that enables the purchase of computers and related products over the Internet. The
company hopes to raise $26.4 million with a proposed offer price of $11
to $13 a share.
pcOrder.com was spun off in 1993 from Trilogy Software, a front-office
marketing and sales automation software vendor. The company has some
legitimate star power: Ross Cooley, a high-profile former senior vice
president at Compaq signed on as pcOrder.com’s chairman and CEO in 1996.
The company develops application software and databases (featuring more
than 200,000 products from 4,000 manufacturers) designed to help
manufacturers, resellers, and corporate end-users buy and sell computer
systems and products online.
It has some impressive customers too, including Compaq, systems
integrator MicroAge and retail chain Computer City.
Clearly there will be a sustainable market for computer product sales
over the ‘Net — it’s one of those naturals. But rather than try its
luck as one of the combatants, pcOrder.com is positioning itself as the
software infrastructure supplier for the vendors and resellers slugging
it out in the ring. Not a bad position to be in, even in a crowded
market.
Revenues more than doubled in the past two years, going from $10.6
million in ’97 to $21.7 million last year. But losses rose dramatically
in that same period, from $1.1 million in ’97 to $9.6 million in ’98.
If pcOrder.com can successfully ramp up its marketing and sales efforts,
as it promises to do, the company could find a defensible stronghold in
this sector.
Tomorrow: Intraware and priceline.com.
