Priceline, Intraware Stepping to Plate

On Tuesday, we looked at pcOrder.com, one of three e-commerce companies
scheduled to price IPOs this week. Today we’ll look at the other two.

Name your Priceline.com

Imagine a world in which you can buy the new vehicle you want at the
price you want to pay, and you don’t even have to talk to the dealer
except to arrange for pickup of your new wheels.

Utopian madness, you say? Perhaps, but that’s what priceline.com
promises customers who use its Web site to purchase new cars and trucks.
Customers simply “name their price” for a specific vehicle and
priceline.com searches its databases for a willing seller. Special
undercoating never even comes up.

The Stamford, Conn. start-up is betting on its “buyer-driven commerce”
transaction model with an ambitious IPO it hopes will raise $115 million
when it debuts March 8. Underwriter Morgan Stanley has yet to announce
the number of shares to be offered or the asking price.

Priceline.com also sells leisure airline tickets — its biggest revenue
generator by far — and books hotel rooms in major U.S. cities.

Last month it began offering “name your price” service for home
mortgages, home refinancing and home equity loans. Consumer services
such as insurance, telecommunications, cruises, rental cars and credit
cards are planned for down the road.

Since opening its Web site last April, the company has racked up
revenues of $35.2 million through December, including $30.4 million from
airline ticket sales. Not bad work in nine months.

The downsides are losses of $94 million since the company was formed in
July 1997, due to heavy costs of branding, marketing and systems
development.

A major risk facing the company is its over-reliance on airline ticket
sales. The airline ticket market is rife with cutthroat competition from
a number of sources, including travel agencies, wholesalers and Internet
travel agents such as Microsoft’s Expedia.com.

Further, not only have 95% of priceline.com’s airline ticket sales come
from just three airlines, the company reports that “a substantial
portion” of airline tickets have been sold below cost. You can’t use
loss leaders indefinitely, especially if they’re your prime revenue generator.

Priceline.com’s IPO will give it plenty of money for its marketing
ramp-up. If the company is to succeed, much of that effort must go
toward broadening its revenue base beyond airline ticket sales.

Intraware’s intranet play

Three-year-old Intraware wants to be the online Consumer Reports (and
purchase) service for IT professionals.

The Web site of the Orinda, Calif.-based company offers prospective
buyers a chance to research, evaluate, buy and upgrade software products
from a current roster of about two dozen vendors, including Netscape,
Sun Microsystems, Informix and RealNetworks.

Intraware is slated to go public Thursday, pricing 4 million shares
between $13 and $15 in the hopes of raising $56 million.

The company’s services include IT Knowledge Center, where IT pros can
evaluate software; intraware.shop, the “try and buy” section of the
site; and SubscribNet, which keeps members informed about software
updates and licenses.

The company has top-flight leadership in President and CEO Peter Jackson
and Chairman Mark Hoffman, co-founder of database software giant Sybase
and currently CEO of e-commerce start-up Commerce One.

Revenue growth in the past year has been impressive as well, with the
fiscal 1998 total of $10.4 million shooting up to $24.6 million in the
three quarters that ended last Nov. 30.

But in those numbers lurks danger, for more than 90% of that $24.6
million in recent revenue comes from transactions with Netscape and the
sale of Netscape products.

AOL’s purchase of Netscape, and its side deal allowing Sun rights to
sell Netscape software, is the wild card in this deck. How it plays out
could have a huge impact on Intraware’s prospects. It may be months
before the picture becomes clearer.

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