E-Commerce for the Big Boys

With the summer vacations, the IPO market has been nonexistent. But in a
few weeks, things will start heating up again.

One IPO to look at is Calico Commerce.

The company is quite old by Net standards, starting in April 1994. In
fact, never in its history has the company generated any profits. So far,
the accumulated deficit is $34.4 million.

Four of its customers account for 52 percent of revenues and ten customers account
for 81 percent of revenues. Then again, this is normal, since Calico’s software
is geared for big companies. Most of its contracts are in excess of $1

Here are the valuation metrics (assuming the IPO is priced at the top of
its current range):

Calico Commerce


pro forma IPO


Shares offered


Price target/actual




Shares out



IPO market cap


less working cap


less LTD


Enterprise value


1999 Revenues


1999 Losses


Annualized rev.





Revenue multiple


Rev. multiple


Some History

In the past 20 years, corporate America has spent billions on enterprise
resource planning and sales force automation — to create efficiencies, as
well as sales.

Unfortunately, these systems do not use the Net, so the
benefits have been limited to a small number of users. What’s more, the
technology tends to be inflexible and proprietary.

But as for Net solutions, these allow for efficient transactions between
customers, resellers and partners. But despite the advantages, companies
do not want to throw-away their legacy systems.

One solution is Calico’s software.

The software, though, is not for selling such things as books or CDs.
Rather, Calico specializes in complex products or services.

The hub of Calico is the eSales Configurator. Basically, this expert
system optimizes customer requirements with product attributes. That is,
giving the customer what he or she wants.

The software calculates such
things as the trade-offs of price, performance and many other complex
variables. In a sense, the software is an automated sales rep.

The software is relatively easy to configure using the
standards of XML (extensible markup language).

One happy customer is Nortel, which uses Calico software to sell its
high-priced complex telecom equipment. Other customers include Dell,
Merrill Lynch and Cisco.


The future looks bright for Calico. The market for ecommerce-enabling
software is expected to grow from $235 million in 1998 to $3.8 billion in
2002 (according to Forrester Research).

Yes, as has been the case with other enterprise software IPOs — such as
Quest Software (QSFT)
, Agile Software

, and Silverstream Software
) — Calico should be strong.

Maybe that’s why Kleiner Perkins invested in the company and that Goldman
Sachs is the underwriter of the IPO.

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