E-Mailbag Monday: WebMethods, Buy.com, ASPs

What do you think will be the hottest IPO this week?

Reply: Despite Greenspan and volatility in the NASDAQ, the IPO market
has been unstoppable. It is not easy to guess the biggest IPO. But I do like
WebMethods.

The company is a leader in the latest cool thing: business-to-business
integration, which is known as B2Bi. Essentially, this technology
integrates customers, partners and suppliers with real-time exchange of
data. Benefits include: increased revenues, better relationships with
outside suppliers and partners, increased efficiencies in the supply chain
and higher rate of return on existing technology. In all, WebMethods has
over 130 customers.

The lead underwriter is Morgan Stanley and the proposed ticker symbol is
WEBM. The price range is $11-$13.

Sell Buy.com?

Buy.com has been delayed several times. But the IPO is expected this week.
Are there problems?

Reply: Delays can occur for a variety of reasons. Perhaps the SEC is
inundated. Or, maybe the company’s bankers are slow. But the worst reason,
of course, is if the IPO is having problems finding takers.

I’m not sure what the cause of the delays were, but I consider the chances
for Buy.com to be problematic. The e-tailing sector has been pulverized in
the past few months. When there are so many high-flying companies — such as
WebMethods — hitting the IPO market, it makes it difficult for a company
like Buy.com.

Buy.com has an awesome site, with a selection of over 850,000 items for
sale. Then again, Amazon.com has an awesome site, but also higher sales and
movement towards profitability. The scorched-earth pricing policy of
Buy.com will likely scare many investors and should dampen enthusiasm for
the IPO. In fact, Buy.com is party to two class action suits because of
alleged mispricing of some of its products.

The lead underwriter is Merrill Lynch and the proposed ticker symbol is
BUYX. The price range is $10-$12.

Asking About ASPs

What is an ASP?

Reply: ASP stands for Application Server Provider. In the traditional
software model, much of the code of an application resides on a PC (known as
the client). With an ASP, applications are hosted on a central server and
can be accessed with thin-client software, such as a browser. A company
would rather use an ASP for a variety reasons: it tends to be cost
effective; it is easy to modify the application (it is changed only from the
central server, not the many PC installations); and, an ASP company will
likely have expertise and cutting-edge experience. Examples of successful
ASPs include Breakaway Systems and Navisite.