Many investors are eagerly waiting for Google, the Web search titan, to go public. But those same investors, many still smarting from losses when technology stocks plummeted, may not be ready to jump at just any new technology offering in 2004.
The market for initial public offerings has languished of late, with fewer than 100 in each of the past three years, including 2003. But in 2004, analysts expect as many as 150 companies to go public -- roughly half of them technology related.
But do not expect a replay of 2000, when there were nearly 400 initial offerings, most of them by technology companies. This time, investors are likely to expect profitability to be on a stock issuer's resume, Richard Peterson, chief market strategist with Thomson First Call said.
Clearly, that is the allure of Google, the closely held Web search company that was founded by two Stanford computer science graduate students in 1998. In recent weeks, Google has become the subject of speculation that it intends to go public in the spring. Although Google discloses little about its financial condition, people close to the company say it reached profitability long ago and has been on a growth path ever since.
Over the last several months, the company approached a short list of investment banks about underwriting the offering, and is considering selling a 10 percent to 15 percent stake to the public in hope of raising more than US$2 billion, executives close to the discussions say.
"It will be exciting on a scale of Netscape," said David Menlow, president of IPOfinancial.com, a research company in Millburn, New Jersey. "The difference is that Netscape wasn't profitable."
Given the losses many investors suffered when stocks plunged, analysts predict that Google's offering is not likely to spur the sort of stock-offering stampede that Netscape did.
"It will not be the Pied Piper," Menlow said. "It's not going to sound the all-clear for companies to go public irrespective of their financial health."
But a successful Google offering may help raise investor confidence in new issues by other profitable technology companies. Or so those companies hope. Staktek Holdings, a computer memory company, is looking to raise US$145 million through an initial offering next year.
The company, based in Austin, Texas, reported revenue of US$47 million last year, and a profit of US$11.5 million.
Not all the technology companies that have filed to go public in early 2004 have made a profit. Marchex, for instance, a relatively obscure online advertising company, hopes to raise US$35 million, despite losing money in 2002.
Likewise, Motive, an e-commerce service company with a recent loss of US$10.5 million, has plans to raise US$70 million, and Atheros Communications, a semiconductor maker that also had a loss last year, hopes to raise US$100 million.
But few analysts expect the public to become giddy about the new technology offerings.
"There are signs of a recovery, but we're not going anywhere near where we were in the late 1990s," Peterson said.
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