To survive in the increasingly crowded markets for business-to-business
software and services, Internet companies must stand out from the
competition in a meaningful way that attracts customers.
webMethods, one of several Internet companies slated to go public this
week, thinks it has that competitive edge by offering software based on
Extensible Markup Language, or XML.
XML is a computer language that allows users a flexible way to create
online formats for presenting information and data. Supporters of XML,
which has become a Web standard, say it will make online transactions
easier and less costly.
And there are many XML supporters. Major corporations and start-ups are
shipping or planning to ship products that support the language.
Is XML the next Linux? It’s too early to tell, but if you think so,
webMethods may be a good bet. The company is offering 4.1 million shares
of common stock in the $11 to $13 price range under the Nasdaq symbol
WEBM. Lead underwriter is A-lister Morgan Stanley Dean Witter.
Even if the market doesn’t know XML from XYZ, demand for another B2B
offering should guarantee a strong debut for WEBM. Don’t be surprised by
an opening-day gain of 300% or more.
Longer-term, the outlook is less clear. A number of B2B software
competitors have a head start on webMethods, which didn’t release its
first product until June 1998. With $4.5 million in revenues last year,
webMethods lags far behind companies such as Open Market (OMKT)($83 million) and InterWorld (INTW) ($40.5 million).
Further, webMethods relies excessively on one customer, SAP AG, which
accounted for 31 percent of its revenues in the nine months ended
Dec. 31, 1999.
And unlike most companies that offer software licenses on a perpetual
basis – collecting payment when the license is granted – webMethods has
issued two-year licenses that require another payment upon renewal.
If XML’s popularity grows, the move should give the company a recurring
revenue stream. If another technology replaces XML, or even if the
industry fails to embrace the language fully, webMethods could be facing
serious customer churn as early as this June.
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