A tale of two IPOs

So while I was at PC Forum, my partner, Ned Carlson, sent me an email on the recent IPO filing of Seven Networks. Having talked to a number of bankers, we always thought that one needed $6-8mm of quarterly revenue, profitability for at least 1-2 quarters, and good visibility for the rest of the year in order to go public. It seems that the filing for Seven Networks goes against the grain. According to its website, "SEVEN is a leader in Out of the Officeâ„¢ technologies; our mobile email software makes it simple and affordable to access corporate and personal data while on the go. SEVEN's software provides secure, real-time access to email and PIM information via a wide variety of mobile devices." The company has a blue chip list of customers like Cingular Wireless and Sprint PCS in the United States; Globe Telecom, KDDI Corp, NTT DoCoMo, Optus and Singtel in Asia Pacific; and mmO2 and Orange in Europe. However, we still do not understand how it can go public with the following numbers: 2002 revenue of $6mm, net loss of $19mm and 2003 revenue of $7mm and a net loss of $13mm. What bothers my partner, Ned Carlson, even more is that some of the investors are even selling in the $100mm raise. What I hear is that they are going to execute a roll-up strategy. Isn't Visto already doing this as well? Does anyone know the story behind this IPO filing?

On another front, you have Brightmail (an anti-spam vendor) which recently filed with some nice numbers. Revenue for FY03 was $26mm up from $12mm the previous year. In addition, the company had net income of $1.2mm for FY03. These are definitely numbers in line with what we were told on the IPO front. Concerns could be the concentration of customers via Microsoft. According to the Computer Business Review in the UK, of the 305 million mailboxes they screen, 145 million are Hotmail and only 5 million are enterprise.

It is amazing how 2 companies with such different numbers can file. All I hope is that both of these companies can meet the expectations of investors and deliver on their respective stories. What we all do not need is a return of the speculative IPO. Tim Oren and Fred Wilson both comment on the action this week.

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One Response to “A tale of two IPOs”

  1. Michael Flannery Apr 2, 2004 at 11:25 am #

    Ed,

    I agree with many of your thoughts. Just wanted to let you know that Kent Thexton the former Chief Data Officer of 02 has recently joined on as President of the company. I know Kent well and have worked with him closely on the search front. He turned down another opportunity in a software company we were represeting in the mobile space that is a three year old company with 70 million in revenue and 10 million in EBIT for seven?
    He has a great belief in the size of the space and the future growth of the revenue. How the company can file for an IPO and raise 100 million was very surprising to me. But the driver to him was the time to liquidity. The opportunity’s we had could not compete with the time frame to IPO. Seems like a blast from the past that is very concerning, thank you for the posting.

    best regards,

    Michael Flannery
    Redwood Partners
    441 Lexington Avenue
    New York, NY 10017
    Office 212-843-8585 ext 208

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