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Follow up:
After going public in December, FreeMarkets Inc. (FMKT-NASDAQ) has had its fair share of bad news. GM canceled its contract with FMKT and a class action lawsuit has been filed for violating the federal securities laws. The lawsuit claims that FMKT knew that GM was taking its business elsewhere but did not disclose this fact in the SEC filing. We're still up 341% from our IPO position. This is currently a hold.
Red Hat, Inc. (RHAT-NASDAQ) had a 2 for 1 stock split on Jan. 10. We're already up 623% in our IPO position but we'll see RHAT continue its market domination in 2000. Not only is RHAT expecting to beat its Q3 results but there are also Linux companies in the IPO pipeline that will lift the sector further. Hold on for more gains.
Barnesandnoble.com (BNBN-NASDAQ) can't seem to lift its share price, and the latest resignation of its CEO does not help. This change in management will not be detrimental to the company because the online bookseller needs fresh blood to lead the company. I still like the company, so hold on for future news.
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Playing the IPO market for $$$ in 2000
by Siu-Yee Ng
The IPO market offers both short and long-term returns. But getting the shares at the cheapest price possible (offer price) is a challenge, especially for the small investor. In the past, shares were allocated mostly to institutions and to the preferred investors. For the most part, this is still true. But IPO shares are getting into the hands of some investors.
Change is slow, so investors will need to be patient. There are channels you can take to participate in the IPO market. First, select a broker who participates in many IPOs. Your account has to be active. Some of the leading investment bankers involved in underwriting IPOs are Goldman Sachs, J.P. Morgan, Credit Suisse First Boston, Lehman Brothers, Merrill Lynch & Co., and Bear, Stearns & Co., Inc. These are full service brokerages, so be prepared to pay more for commission.
Or you can choose to start an account with a regional underwriter like Jefferies Group, Inc., Kashner Davidson Securities Corp., Dain Rauscher Corp., Ferris Baker Watts, Inc, or William Blair.
Some investors have chosen to try using the online broker option: Charles Schwab, Fidelity, E*Trade, DLJ Direct, and Wit Capital. But Internet brokerages usually have few shares to allocate, and they are allocated to investors with active accounts.
Keep in mind that sometimes even institutions do not receive all the shares requested. Some will need to buy in the aftermarket (when the stock already begins to trade). 1999 was a record-breaking year for aftermarket gains. The average gain per issue for 1999 was 199%. So for those investors who missed out on the IPOs, the aftermarket offers another opportunity for huge profits.
Cash in on the Internet revolution with a one-click stop!
It's tough running a business these days. There's more competition, and with the Internet any entrepreneur can start a business. Historically, companies have invested heavily in enterprise applications to automate and improve the efficiency of their internal business processes. But times have changed, and the markets have become more dynamic. Out with the old and in with the new. Companies have begun to recognize that they must coordinate more closely with their customers, suppliers and business partners.
Traditional enterprise applications, however, do not readily support business processes beyond the borders of an enterprise. As a result, companies relying only on their enterprise applications have not been able to easily integrate their business processes with those of their customers, suppliers and other business partners to achieve productivity gains.
In the midst of this environment, the Internet has emerged as a crucial medium for electronic commerce. Business-to-business e-commerce has already enabled organizations to tap new revenue streams, streamline cumbersome processes, lower costs and improve productivity. Businesses are seeking a B2B (B2Bi) integration solution that allows them to utilize their existing portfolio of enterprise applications to exchange information and transact business with customers, suppliers and other business partners over the Internet.
According to Forrester Research, revenue generated from B2B e-commerce will exceed US$1.3 trillion by 2003, representing a far larger market opportunity than business-to-consumer e-commerce.
Forrester Research also estimates that B2B e-commerce will account for more than 90% of U.S. e-commerce transactions by 2003. International Data Corporation projects that the Internet commerce application market will grow from US$444 million in 1998 to over US$13 billion in 2003.
Shorter and better
webMethods, Inc. (WEBM-NASDAQ) came in the nick of time. webMethods is a provider of infrastructure software and services that allow companies to achieve B2Bi. The company's software solution permits customers to rapidly and cost-effectively deploy new, real-time business-to-business e-commerce applications over the Internet by integrating their existing enterprise applications with those of their customers, suppliers and other business partners.
webMethods provides the foundation for a new class of B2Bi applications that can be delivered with shorter, more cost-effective implementation cycles and the ability to scale to large numbers of business partners. webMethods' B2B provides companies with integrated direct links to buyers and suppliers, connects them to major B2B marketplaces and enables real-time, interactive communication through the Internet regardless of existing technology infrastructure. webMethods' B2B has been developed exclusively in the Java programming language, which means webMethods' B2B can be readily deployed on almost all commonly available computing hardware and operating systems. This makes it easy to deploy the webMethods' B2B solution across a large trading network running different hardware and operating systems.
The company's B2B software provides support for a broad range of current and emerging B2B communication standards, including eXtensible Markup Language, or XML, traditional EDI, Open Buying on the Internet, or OBI, and XML-based e-commerce frameworks, such as RosettaNet, cXML and Microsoft BizTalk.
Win-win situation
webMethods' software helps a company achieve significant cost savings and productivity enhancements by reducing cycle times, lowering inventories and reducing error rates through the real-time exchange of information. Closer integration with their suppliers and buyers help the company's customers improve their planning and forecasting capabilities.
Customers will have real-time pricing and available information for key products and services. For example, webMethods' B2B can enable a company to automatically check the availability of a requested item in its supplier's inventory and relate pricing, availability and shipping information directly to its customer. An order for the requested item could then be automatically entered directly into the supplier's order processing system. Quick and easy.
Sell, sell, sell
webMethods' software is marketed globally through a direct sales force and a number of resellers and systems integrators. A key element of the company's sales and marketing strategy is to keep its customers and business partners happy and content. Referrals are the best and easiest sales. Providing solutions to leading buyers, suppliers, portals and enterprise software and hardware companies pursuing B2B e-commerce opportunities, webMethods' software sales will only increase as its technologies become more widely deployed in the marketplace.
webMethods' B2B has been licensed to customers in a variety of industries including high-technology manufacturing, telecommunications, financial services, shipping and logistics, chemicals and insurance. As of October 31, 1999, the company had over 100 customers, including Dell, DHL, Dun & Bradstreet, W.W Grainger, Hewlett Packard, Lexmark and Occidental Chemical.
The company has also established strategic relationships with leading B2B e-commerce marketplaces such as mySAP.com, the Ariba Network, Clarus Supplier Universe, Grainger.com, OrderZone.com, VerticalNet and Intelisys, many of which have purchased webMethods' software to operate their trading networks.
In March 1999, webMethods entered into a development partner agreement with SAP AG. Their relationship with SAP AG provides them with an important endorsement for their software. This will expose the capabilities of a restricted version of its webMethods' B2B software to the SAP AG customer base and gives it the opportunity to license the fully-featured version of the webMethods' B2B software to its customer base. Under the development partner agreement, webMethods granted SAP AG a perpetual license to include a restricted version of webMethods B2B in its software.
SAP AG has become a significant customer, accounting for approximately 35% of webMethods' revenues for the six months ended Sept. 30, 1999 as a result of the development partner agreement. As I said before, I don't like to see a large portion of revenues derived from a small number of customers. So it's crucial to keep an eye on this partnership.
Under the agreement, SAP AG pays a quarterly fixed fee. SAP AG must pay this fee even if the agreement is terminated. webMethods may see more revenue as a result of SAP AG customers that upgrade to an unrestricted version of webMethods B2B.
Revenues are up
Revenue is derived from sales of licenses of the company's webMethods B2B software, professional services, and maintenance and support. The company is not generating a profit yet, but revenues are up which is a good sign.
Total revenue increased by approximately US$5.9 million, or 589%, to US$6.9 million for the six months ended Sept. 30, 1999, from US$1.0 million for the six months ended Sept. 30, 1998. Total revenue increased by approximately US$4.3 million, or 2,588%, to US$4.5 million in fiscal 1999, from US$166,000 in fiscal 1998 as webMethods first shipped its B2B at the end of the first quarter of fiscal 1999.
Gross profits increased by approximately US$4.2 million, or 468%, to US$5.1 million for the six months ended Sept. 30, 1999, from US$907,000 for the six months ended Sept. 30, 1998. Gross profit increased by approximately US$3.6 million, or 2,194%, to US$3.8 million in fiscal 1999 from US$166,000 in fiscal 1998.
A strong backbone
The chairman of the board, president and CEO founded webMethods in June 1996. He has served as the vice president of engineering at Open Software Associates, an Internet and graphic user interface tools company.
The financial officer and treasurer served as the controller and vice president of finance for SRA International, Inc., an information technology company.
The president of sales has served as vice president of worldwide sales since Sept. 1999. Prior to this position he served as director of worldwide sales for the help desk and network management group at McAfee Software, now Network Associates, Inc.
The vice president of product marketing was employed by the Open Environment Corporation, a distributed computing software company. He's also a frequent writer and specializes on topics related to XML and B2B e-commerce.
The vice president of marketing was the director of Web services at America Online, an online service provider.
Investors include FBR Technology Venture Partners, Goldman Sachs and the Mayfield Fund. Underwriters include Morgan Stanley Dean Witter, Merrill Lynch & Co., Dain Rauscher Wessels and Friedman, Billings, Ramsey & Co. The webMethods is tentatively set to debut during the week of Feb. 7, 2000.
For more information after the quiet period contact webMethods, Inc. at 3877 Fairfax Ridge Road, 4th Floor, Fairfax, VA 22030; phone: 703-460-2500; fax: 703-460-2599; website: www.webmethods.com.
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