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Two Other IPOs Besides Google on Deck

Jeffrey R. Hirschkorn, Senior IPO Analyst, Aug. 16, 2004

In-depth analysis on the impending IPO from Google (proposed: GOOG) will be published by my esteemed colleague Tom Taulli later today. His analysis will focus on the unusual path [and missteps] to market by the �Net search engine. After several bumps along the way by the firm�s joint book runners Credit Suisse First Boston and Morgan Stanley, with a Dutch auction IPO, they�ve turned to Bill Hambrecht to coordinate, through his technology at W.R. Hambrecht + Co., the entire Dutch auction IPO from Google. Mr. Hambrecht, known as the Dutch auction maverick, has certainly turned in some strong darlings from his OpenIPO underwriting process.

For now, let�s delve into the other two IPOs expected to price in the summer�s final activity in the initial public offering. Of course, tough market conditions will certainly play a role in the pricing and eventual trading of the group of IPOs anticipated in the upcoming week. Pricing demand could be weak, sources say. Attracting buyers with the imminent launch of Google could also be a deterrent and lead to potential downsizing in the transactions.

Let�s begin with eCost.com (proposed: ECST). The IPO, which has retained William Blair & Co. to lead, is expected to offer 3.15 million shares at projected talk of $9-$11. Formed in February 1999, eCost.com is an online retailer that features over 100K products in seven categories that include computer hardware and home electronics. Products for sale are from major companies such as Canon, Hewlett-Packard, Seiko and Toshiba.

Obviously, the company�s financials are near perfect, with no long-term debt on the books. Revenues have steadily increased with the firm entering profitability in 2002. It broke even for the first quarter of 2004. It reported profits of $6.2 million in 2003 after accounting for a charge of $5.9 million related income tax provisions.

Overall success at its parent PC Mall can be partially attributed to strong numbers being posted at its eCost.com. Sales for the first quarter at eCost.com rose 60%. With the performance of eCost.com anchoring the overall company, now, according to analysts, a good time to monetize on one of its strongest assets. And, in doing so, the IPO is the first part of a two-step process for PC Mall intent to divest eCost.com.

Following the IPO, PC Mall retains nearly 82% ownership in eCost.com. Plans call for PC Mall to fully divest its remaining stake in six months after completing the initial public offering. A portion of the proceeds - $10 million � will go to PC Mall for repayment on an outstanding note. In this case, the spin-off works for all interested parties.

Now, onto WebSideStory (proposed: WSSI), a leader in online web analytics, is finally on the launching pad for its IPO. Readers of this space should recall previously published analysis on the San Diego, Calif.-based firm. Do you remember Oct. 10, 2000? That is when WebSideStory officially withdrew its first attempt at going public. Market pundits saw the withdrawal of the IPO as a good sign, giving the declining market conditions at the time. Also, hurting the firm's chance of garnering an audience was its inability to generate a profit.

WebSideStory refiled plans for an initial public offering in late May. Terms for the IPO foresee the sale of five million shares at talk of $10-$12. Friedman Billings Ramsey and RBC Capital Markets are joint lead managers. Co-managers on the float include William Blair & Co. and Roth Capital Partners.

WebSideStory features an array of [top ten] customers that include Walt Disney Internet Group, Best Buy, Nokia, Delta Tre Informatica, British Sky Broadcasting, Cisco Systems, Sony, AT&T; WorldNet, Daimler Chrysler and FedEx Corporate Services. These clients were the top revenue generators at WebSideStory in its 2003 year.

Still, while consistent profitability has not been achieved, to date, analysts are overly happy with declining losses and advancing revenues. Venture capital firms Summit Partners and TA Associates are investors in the firm.

A comprehensive analysis of the current state for IPOs will be published later today. It will involve trends and themes in initial public offerings. Pricing demand and pickup in deal postponement and withdrawals will be discussed. Despite recent toughness in new issues, several new deal filings have taken place. Kudos for Friedman Billings Ramsey! For more, check back with us.

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