Vitria: Waiting for the Dust to Settle

Easy come, easy go. That’s been the life of many employees at newly public
Internet companies. A few months ago, many employees had millions in stock
options – now, well, they may have a fraction of this.

Such a rude awakening is likely to generate lots of fear, which in turn may
mean heavy sales of Net stocks. Although, after an IPO, employees cannot
sell there shares until six months later. This is called a lock-up
agreement. Late last year, of course, many Net companies went public. Now,
the lock-up agreements are set to expire. And don’t be surprised if
employees start to sell.

But then again, this is not necessarily a sign of a company’s weaknesses.
There are many reasons why employees sell shares: buy a new house,
diversify holdings, buy a car, or even pay for a divorce. In fact, the
expiration of lock-up agreements can present interesting investment
opportunities. How? Well, the selling tends to be temporary.

One company worth considering is Vitria Technology . The
company builds eBusiness platforms. The flagship product is BusinessWare.
With this software, companies have the tools to the do following: modeling
(define the mission critical business processes using visual models);
automation (this allows for the coordination of information using the
models); monitor and analyze (there are real-time metrics to identify
problems the moment they occur). The technology helps companies lower
operating costs, increase customer satisfaction and reduce time to market.

In the latest quarter, the company increased sales by 294% to $20.5 million.
What’s more, losses were low: $761,000 (this compares to a loss of $2.7
million in the same quarter last year). The company has a diverse customer
base, covering such industries as finance, utilities and telecom.

Vitria recently launched its Business Network. This allows trading partners
to transact with each other. For example, a utility provider can have access
to hubs that provide Internet services. Vitria calls this
business-to-network (B2N).

The stock has been on a wild ride, soaring to a high of $106 and hitting a
low of $7-5/8. Now, the stock is trading for $29-3/4. On May 11, the
company’s lock-up will expire. A whopping 31 million shares will be
available for sale. This should put temporary pressure on the stock. But, it
may be an opportunity to get the stock on a dip.