By Raymond Hennessey, Wall Street Journal, April 12, 2004
Being a dot-com is suddenly back in fashion.
After two years that saw many companies change their names to drop the tarnished suffix from their corporate names, potential IPOs seem to no longer feel there’s such a stigma. In the last several weeks, several companies with “.com” at the end of their names have filed for initial public offerings of stock, including salesforce.com Inc., Shopping.com Ltd. and Advertising.com Inc.
Is this the start of a new Internet bubble? Not necessarily, analysts say. But companies have been emboldened by the solid performance of existing Internet stocks over the past 12 months. Yahoo Inc., for instance, has seen its stock more than double over the past 12 months, a move capped last week by its announcement of a two-for-one stock split. Such successes have removed some of the stain associated with being a dot-com.
“It’s kind of hip to be dot-com again,” said Tom Taulli, manager of Oceanus Value Fund, a hedge fund based in Newport Beach, Calif. “It’s back in style. It’s retro.”
It’s also a marked change from the recent past. In the 1990s, companies fell over themselves to add a “.com” to their names. In 1995, 1-800-Flowers, one of the best-known telephone florist brands, became 1-800-Flowers.com Inc. in advance of its 1999 IPO. That Web name came even though the company’s telephone sales at the time — and even now — are greater than those generated online.
But, once the bubble burst, many companies had a change of heart. Even those companies that arguably should have had a dot-com in their name decided to drop them. Netflix Inc., the online movie-rental company, originally filed to go public in April 2000 as Netflix.com. But the company withdrew its IPO three months later, citing poor market conditions. About two years later, it successfully went public, though without the dot-com suffix.
The new dot-coms planning IPOs have had the chance to change their names and didn’t. In fact, Shopping.com, an Israel-based online comparison-shopping company, did change its name, but remained a dot-com. The company was known as DealTime.com Ltd. when it filed in March 2000 to raise $50 million through the now-defunct Robertson Stephens securities firm. The company withdrew that offering in 2001 and later changed its name. The company, which re-filed its IPO in late March, plans to raise about $75 million through Goldman Sachs Group Inc. and Credit Suisse Group’s Credit Suisse First Boston.
The recent wave of dot-com IPOs comes as other Internet offerings have performed well. In December, Ctrip.com International Ltd., a Chinese online travel agent, became the first company in more than two years to trade at more than double its offering price in initial trading.
Furthermore, the added breed of dot-coms don’t appear to be the kind of high-risk enterprises of past years, given that several are profitable. Take salesforce.com, a customer-relationship software company based in San Francisco. Over the first nine months of last year, it reported net income of $4.7 million, on revenue of $66 million, according to offering documents filed with the Securities and Exchange Commission.
Likewise, Advertising.com, an online marketing company based in Baltimore, is in the black, reporting net income of $18.7 million on revenue of $132.2 million in 2003, according to SEC filings.
Neither salesforce.com nor Advertising.com has set initial price terms on their offerings, which are being led by Morgan Stanley and Goldman Sachs, respectively.
There remains the risk that a spurt of offerings from Internet companies will cause less-established Web companies to try their own hands at IPOs, but it’s unlikely investors will see a flood of companies identifying themselves as dot-coms.
“I’m not sure there will be that phenomenon where you see companies slapping on a dot-com and expecting to get a premium for it,” Oceanus’ Mr. Taulli said.