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Personal Touch Pays Off for Art Technology

 

by Hal Plotkin
Silicon Valley Correspondent

A growing list of blue-chip customers and expectations of future industry consolidation have helped drive Art Technology Group Inc.’s {ARTG} stock price up more than 300 percent since the company’s July IPO.

“I’m very positive on them,” says David Truog, an analyst at Forrester Research, based in Cambridge, Mass. “They’re a very strong front-runner in the e-commerce platform field.”

Boston-based Art Technology makes Internet relationship-management software tools that profile Web-site visitors and create more personalized online experiences.

“ATG’s technology will be very important going forward,” says Albert Pang, research manager at International Data Corp. “On the Internet, the ability to deliver relevant content to the visitor makes a very big difference.”

Art Technology went public on July 21 at an initial price of $12 a share. More recently, the stock has been changing hands at $40 a share.

ARTG post-IPO stock performance chart

Web sites powered by Art Technology can, for example, remember visitors by name, suggest appropriate products, and provide updates on topics of known interest. While many other firms supply similar services, or claim to, analysts are particularly impressed by the company’s growing customer list.

“It’s the biggest asset they have,” Pang says.

Art Technology has helped develop Web sites for more than 150 customers so far, including leading high-tech firms such as Eastman Kodak Co. {EK}, Informix Corp. {IFMX}, Newbridge Networks Corp. {NN}, Network Solutions Inc. {NSOL}, Sony Corp. {SNE}, and Sun Microsystems Inc. {SUNW}, as well as financial services firms such as John Hancock Funds and Scudder Kemper Investments.

“ATG has a big advantage over companies trying to enter the market,” Pang says. “They continually work with their customers to develop new applications. The more they succeed, the less likely it is a customer will want to work with some untested product.”

Web-site operators are increasingly relying on personalization technology as a way to retain customers. That, analysts say, leaves Art Technology strongly positioned in the fast-growing Internet-commerce application market, which is projected to mushroom to more than $13 billion by 2003 from $1.7 billion this year, according to IDC.

Check out Art Technology Group’s Web site

Erica Rugullies, an analyst at Giga Information Group based in Boston, shares the generally positive view of Art Technology’s competitive posture.

“Compared to other [commerce servers] ATG’s Dynamo Commerce Server has more advanced fully integrated profiling and personalization functionality,” Rugullies wrote in a recent report.

Nonetheless, Art Technology faces a raft of competitors, including Redwood City, California-based BroadVision Inc. {BVSN}, which has filed a patent-infringement lawsuit against Art Technology; Eden Prairie, Minn.-based Net Perceptions Inc. {NETP}; and Vignette Corp. {VIGN}, based in Austin, Texas.


BVSN 52-week stock performance chart

Other competitors include even larger players, most notably the marketing alliance between America Online/Netscape and Sun.

“Internet relationship-management is a white-hot category right now,” says Ian Morton, an analyst at San Francisco-based Hambrecht & Quist, an investment-banking firm that helped take Art Technology public.

As a result, many analysts expect to see a round of consolidation within the industry before too long.

“Consolidation is inevitable,” Pang says. “We expect a number of personalization vendors will merge to compete with Sun/Netscape or even Microsoft Corp. {MSFT}.”

For the moment though, Art Technology’s president and CEO, Jeet Singh, says his company will be a buyer rather than a seller.

“I do expect to see a lot of consolidation in the next two to three years,” Singh says. “But right now, we’re potential buyers. We’re aggressively looking at who we might partner or merge with.”

Art Technology posted a loss of $1.4 million for the recent second quarter, on revenue of $6.2 million, as compared with a $400,000 loss on revenue of $2.9 million for the same period last year.

The company is expected to announce its third-quarter earnings around the middle of this month.

List of Customer Relationship Management (CRM) Vendors

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