One Hot IPO May Be In Store

Infrastructure companies have been among the most popular among investors in
the past two years because they address a core problem: The need for faster
and more reliable connectivity to handle the tsunami of data flooding global
networks.

Besides straining the ability of networks to handle the explosion of IP
traffic, this tidal wave of ‘Net-based information has created another
challenge for large corporations drowning in data: Where to store it all.

Helping corporate customers safely warehouse huge amounts of data enabled
storage market leader EMC to become one of the biggest successes on Wall
Street in the ’90s. (On Wednesday, EMC announced its sixth stock split since
1992.)

Indeed, so dominant is Massachusetts-based EMC that it’s hard to imagine
another data storage company making a splash with an IPO, especially in
recent weeks.

But another Bay State data storage player could launch the next ticker
moonshot when it goes public. StorageNetworks filed for an offering in early
March and already is slated to debut on the Nasdaq exchange sometime next
week.

The company hopes to raise $162 million in the offering of 9 million shares,
which is being led by Goldman Sachs, also one of its largest shareholders,
with a pre-IPO stake of 14.5 percent. StorageNetworks will trade under the
symbol STOR. Other investors include Dell Computer and Global Crossing.

Unlike companies such as Exodus Communications (EXDS)
, which performs a number of Web-hosting and related services,
StorageNetworks focuses exclusively on data storage. Internet companies pay
STOR a monthly fee
to house and provide easy access to their data, thus freeing up servers and
other network assets.

StorageNetworks likens its service and fee structure to that of a utility,
differentiating itself from companies selling hardware allowing customers to
store their own data and those offering a variety of outsourced services.

With nearly two dozen “co-location” facilities in place already,
StorageNetworks plans to expand its fiber-optic network of storage centers
to 50 – and double its workforce of 350 – by the end of this year.

Among StorageNetworks’ major customers are Lycos (LCOS)
, Yahoo (YHOO)
and Merrill Lynch. Last year STOR, founded in October 1998, had $6.3 million
in revenue and a net loss of $22.6 million.

While its lists of customers and financial backers are impressive,
StorageNetworks most valuable calling card is its partnership with EMC,
which once employed CEO Peter Bell and several other STOR executives.
StorageNetworks bases its storage infrastructure on EMC hardware and
software.

With industry giants crowding its list of customers and backers, and with
storage equipment market leader EMC in its corner, look for StorageNetworks
to be warmly greeted by investors when it goes public – however cold the IPO
waters may be.

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