Apropos IPO Leaps up on Opening Day


by Hal Plotkin
Silicon Valley Correspondent


Analysts say investors should be cautious about betting on Apropos Technology Inc.’s {APRS} stock, even though the company’s initial public offering has already caught fire in early going, opening at 50 on Thursday.

Apropos Technology Post-IPO Stock-Performance Chart

Late Wednesday, Apropos Technology priced its 3.7 million share offering at 22 a share, above its initial filing range of 17 to 19 a share.

Oakbrook Terrace, Ill.-based Apropos Technology makes and sells software solutions that automate customer call centers, tying customer e-mail, telephone calls and records of Web-site visits into a single information system that provides companies with a complete computerized overview of all their customer interactions.

Apropos Technology’s plans to go public got a big boost last week when Redwood City, Calif.-based Red Herring, a magazine that caters to venture capitalists and entrepreneurs, gave the pending stock offering its highest rating, naming it one of this month’s “red hot” IPOs. Red Herring’s IPO ratings are based on a survey of an undisclosed number of “Wall Street sources,” according to the publication.

Backers of the Apropos Technology IPO had said the company’s stock stood a good chance of being as well-received as the stocks of other newly public companies serving the same market, most notably Kana Communications Inc. {KANA} and Silknet Software Inc. {SILK}, which recently announced plans to merge.

Kana Communications, based in Palo Alto, Calif., went public on Sept. 21, with shares also initially priced at 15. Kana’s stock has soared since then, rocketing past 250 a share.

Manchester, N.H.-based Silknet Software went public on May 5, with shares priced at 15 each. The stock has come close to the 200 mark in recent sessions.

Kana Communications Ppost-IPO Stock-Performance Chart

Silknet Software Post-IPO
Stock-Performance Chart

Several leading industry analysts, however, say a similar measure of unbridled enthusiasm for Apropos Technology’s IPO would be misplaced.

“I’m not expecting it to perform as well as Kana, because Kana has already happened,” says Cormac Foster, an analyst with Jupiter Communications, based in New York. “It may well be a red-hot IPO, but in the end, I think there will be a shakeout and a number of these red-hot IPOs will cool down as the market consolidates.”

That could leave early Apropos Technology investors holding an empty bag down the road, agrees Bob Chatham, senior analyst at Forrester Research, based in Cambridge, Mass. “It’s another ‘me-too’ company taking advantage of the current environment,” he says.

And what about the Red Herring “red hot” rating?

“Nothing surprises me,” Chatham says. “But it’s not all that well-deserved.”

Predictions are all over the map when it comes to the overall size of the market being addressed by companies such as Apropos Technology, Kana Communications, Silknet Software, and another well-known rival, San Jose, Calif.-based Quintus Corp. {QNTS}, which also recently went public.

Sales of automated e-mail response-system software products are expected to grow at an annual compound rate of 23.4 percent over the next few years, topping $2.9 billion by 2003, according to a recent estimate by Forrester Research.

Slicing the market another way, to include the full range of related collaborative services and support that could be addressed by such vendors, International Data Corp., based in Framingham, Mass., puts the projected overall 2003 total market opportunity at a much higher $42.7 billion, representing a compound annual growth rate of 30 percent over the next four years.

What’s more, more than 80 percent of online merchants say they are interested in deploying automated customer-relationship management products, though only 2 percent of them have already implemented such solutions, according to a June 1999 survey by Forrester Research.

“There’s room for everyone in this market,” Chatham says. “But Apropos is not going to be a hundred-million-dollar company.”

Analysts say Apropos Technology’s competitors appear, at least for the moment, to be doing a much better job creating the marketing alliances needed for long-term success.

“Ultimately, the market will belong to the companies that can bring together powerful solutions through networks of partnerships by attracting the right partners,” wrote Stephen Graham, vice president of IDC, in a recent research report.

Quintus’s stock, for example, took off early this month after the company announced on Jan. 31 that KPMG, one of the big five accounting firms, will soon create a global customer-relationship management practice aimed at deploying Quintus’s solutions to customers around the world.

Quintus Post-IPO Stock-Performance Chart

Apropos competitors Kana Communications and Silknet Software, on the other hand, benefit from their combined reputation as first-movers in the market, boasting a 450-strong customer list, compared with the 140 clients claimed by Apropos Technology. Kana Communications/Silknet Software customers include 12 of the top 20 most-trafficked Web sites and four of the five top e-commerce sites, according to Media Metrix, based in New York.

Although its customer list is smaller, Apropos Technology does claim some big clients of its own, including Inc. {AMZN}, Nokia Corp. {NOK} and 3Com Corp. {COMS}, all of which also work with other software-solution providers.

“The truth is I don’t hear a lot of noise coming from Apropos,” says Christopher Hoffman, worldwide director of application solution services at IDC. “I don’t see them as being one of the Silknets, Kanas or Quintuses.”

Hoffman says all that could change very rapidly, though, if Apropos Technology succeeds in creating the kind of marketing partnerships recently announced by Quintus.

“The market is still in a state of flux,” Hoffman says. “I would by no means say the fat lady has sung.”

Hoffman says the overall demand curve in the industry is so strong that he sees good growth prospects for all well-run companies focused on the market. The big payoff for Apropos investors, he says, would occur if Apropos Technology does tie itself in with one of the remaining big five professional-services firms.

“That could happen,” Chatham agrees. “But I don’t see any compelling reason Apropos would deserve that status. There’s nothing that really sets the company apart.”

At present, Apropos Technology has marketing alliances with several major firms, such as The Netherlands-based Baan Co. {BAANF} and Siebel Systems Inc. {SEBL}. Analysts, however, point out that companies such as Baan and Siebel are eager to tie all available technologies together and work with many competing software providers.

“It’s not the same as the deal Quintus has with KPMG,” says Erin Kinikin, an analyst at the Giga Information Group, based in San Jose, Calif. “The others are product companies. KPMG is bringing Quintus in on its deals. Siebel doesn’t like to bring anyone in on their deals.”

As a result, Kinikin says Apropos Technology, despite the recent hype about the company, remains “a step behind Kana and Silknet in terms of their evolution. That means there is more risk involved.”

Apropos Technology posted a loss of $5.6 million on revenue of $12.4 million for the nine months ended Sept. 30, as compared with a loss of $3.2 million on revenue of $6.4 million for the same nine-month period a year earlier.

Kana Communications and Silknet Software, by contrast, reported combined revenue of $9.6 million for the most-recent single quarter on record with combined losses of $8.2 million over the same three-month period.

Quintus lost $3.2 million on revenue of $13.5 million for its fiscal third quarter ended Dec. 31.

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