Mpath Goes Live With IPO

Online live community site and technology provider Mpath Interactive
isn’t playing around with its IPO. The company, best-known for its
interactive games site, priced Wednesday at $18 per share, far above the
original $10-$12 range set in February.

Indeed, Mpath twice upped its pricing range this week alone, to $12-$14
on Tuesday and $14-$16 on Wednesday. With 3.9 million shares set to
begin trading Thursday, the company now hopes to pull in $70.2 million,
nearly two-thirds higher than the $42.9 million initially sought in the
offering.

And why not? The splashy post-correction debuts of Log On America and
Razorfish prove that demand for Internet IPOs remains high, even though
the Internet stock market isn’t quite back on its feet. No sense in
leaving money on the table.

Based in Mountain View, Calif., Mpath runs two of its own live community
sites, mplayer.com and HearMe.com. Mplayer is a multiplayer
interactive games service that allows Internet users to square off
against each other for free. Games range from the sedate (chess,
Scrabble, poker) to the violent (Annihilation Center, Gangsters and Alien vs. Predator).

Mpath officials say Mplayer has grown since its inception in October
1996 to be the 10th-largest Web site in terms of time spent there by
users, with more than 300 minutes of average monthly usage per visitor.
While Mplayer tends to draw a younger, male audience, HearMe is designed
for a more diverse group. Launched earlier this year, HearMe is a live
audio chat site covering topics ranging from sports to family to general
events. It even has a channel called “On Stage,” a cyber open-mike where
people can sing, recite poetry or do comedy. (Do they provide a
Java-enabled hook?)

Virtually all of Mpath’s revenues from its own sites are derived from
advertising. Gross revenue from the Mplayer site grew from $686,000 in
1997 to $3.02 million last year, a 341% increase.

The company’s biggest revenue generator is its Mpath Foundation business
unit, which licenses technology and provides fee-based services to
online companies seeking to create live communities on the Web. The
Foundation unit’s revenues grew from $2.04 million in ’97 to $5 million
last year.

Mpath’s proprietary technologies include POP.X, an end-to-end system for
deploying people-to-people applications on the Internet, and customer
management software used to analyze user behavior, provide service and
enable billing. Major customers include CSK/Sega, Sony and Electronic
Arts, which accounted for 45% of Foundation revenues last year.

The growth in revenue from Mpath’s own sites – which should accelerate
as the new HearMe site draws more traffic – has provided better balance
to Mpath’s revenue mix. Live community revenues went from 25% of the
$2.7 million in total revenue from 1997 to 38% of last year’s $8.03
million in total revenue.

On the minus side, Mpath accumulated $53 million in losses from its
inception in January 1995 through last December. One good trend: Net
loss dropped from $13.6 million in 1997 to $11.8 million in 1998.
Mpath faces competition from other companies building Web-based live
communities, including Cendant, E-Pub Services, Lipstream, SegaSoft,
Sony and Microsoft. More traditional media companies such as Disney, NBC
and CBS also could enter the fray.

For now, though, there’s plenty of running room in this market. With its
growing base of visitors and more sites expected to need technology for
creating their own live communities, Mpath appears to be well-positioned
for success, and should enjoy a good opening day of trading.


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