Loudcloud finds bouyancy after pre-IPO "split"

Weekly Corporate Growth Report, Mar 19, 2001

Loudcloud Inc. has proven to be one of the few Internetrelated IPOs of late to show a surprisingly good first day performance. The company went public March 9, 2001, and ended its first day up nearly two percent closing at $6.14.

Though the firm was counting on raising close to $200 million with its original offering, the $150 million IPO was a very good sign that investor's see value in the company. Loudcloud was also able to pull this off amidst a slow, unexciting market that offered little hope for new tech stocks.

Loudcloud manages Internet infrastructures for online-- intensive businesses. The company's packaged Smart Cloud service encompasses the necessary software and hardware to build and maintain a site, including application deployment, content distribution, e-mail and site testing.

The original offering of 20 million shares between $8 and $10 each was reconfigured to 25 million shares offered at $6 each. The new price was much more attractive to investors who have grown wary of betting on Internet startup companies that are lacking profitability.

The only other significant tech IPO recently was Riverstone Networks, a maker of routers and switches. The company raised $120 million on its February 2001 offering, but has seen its share price cut in half, since.

Loudcloud is having a much more difficult time attracting investors than co-founder Marc Andreessen's last startup venture, Netscape Communications. Netscape's stock price nearly doubled on its initial offering making it one of the original companies fueling the Internet IPO buying spree. The day Loudcloud went public, the Nasdaq Composite Index closed down 116 points to 2053 due to factors such as Intel Corp.'s earnings warning.

Loudcloud has a history of significant losses and minimal revenue. The company posted revenue of only $6.5 million in the nine-month period ending October 31, 2000, but had a deficit of nearly $180 million.

The fact that the company is growing rapidly is giving investors hope. The firm has landed several large clients and the list is growing. It still remains to be seen if more clients will translate into a higher stock price, however.

Source: Wired News