cnbcs108

IPrint.com’s IPO Makes Weak Debut


by Hal Plotkin
Silicon Valley Correspondent

IPrint.com Inc.’s {IPRT} position as the first-mover in an exploding new online market bodes well its long-term prospects, though its initial public offering has gotten off to a poor start on Wednesday.


IPrint Post-IPO Stock-Performance Chart

“iPrint is really the first quick-printer on the Web,” says Thad McIlroy, program manager at Seybold Seminars, a leading online publishing trade show firm based in San Francisco. “A significant portion of the printing business is well-suited to be pushed to the Web. I think iPrint will have a high-volume business.”

Shares of the company opened at 14 1/2, Wednesday, before sliding back to about $11. Late Tuesday, iPrint priced 4.5 million shares at 10 a share, at the top of its initial filing range of 8 to 10 a share.

Redwood City, Calif.-based iPrint.com was established in August 1996. Customers who visit the company’s Web site can place online orders for a variety of printed products, including business cards, letterhead, promotional items, printed novelties and even full-length books. Orders are entered using online templates that walk customers through a simple design and purchasing process.

“They have a very easy-to-understand, nice layout, nice navigation site,” says Melissa Shore, an analyst with Jupiter Communications, based in New York. “It jumps out at you.”

Judging by the numbers, it has been jumping out at a lot of people.

The company snared fifth place on the list of the most-popular online retailers for the first time ever last November, according to PC Data Online, based in Reston, Va. The company’s Web site dropped to No. 8 during January but still pulled in more paying customers than many other well-known Web sites, including BUY.COM Inc. {BUYX}, Drugstore.com Inc., and Gateway.com {GTW}.

“iPrint.com has been a consistent top-20 Web retailer for the last six months,” says Cameron Meierhoefer, Internet research analyst for PC Data Online, in a statement released when the holiday online-sales rankings were announced. “As a leader in the stationary/office-supplies category targeting the small-business market, breaking into the No. 5 position, during a season driven by holiday shopping, was a particularly noteworthy accomplishment.”

Sales of print items in the United States generated $292 billion in 1998, the last year for which figures are available. Commercial-printing operations that specialize in the type of short-run print jobs targeted by iPrint.com accounted for $58 billion of that revenue over same time period, according to CAP Ventures Inc., based in Norwell, Mass.

“Online printing is going to take off,” says Matt Sanders, an analyst with Forrester Research, based in Cambridge, Mass. “The industry is set to explode.”

One reason for such confidence revolves around the fact that most print-design jobs are already done on computer. Letting customers do the design work on a Web site or transmit their pre-existing designs over the Internet to a printer who then ships the finished goods back to the customer is, analysts say, an ideal Web-based business application.

“You’re talking about low-involvement, low-risk, low-price items that small business owners are used to outsourcing,” Shore says. “It’s certainly a natural for the Internet.”

It is so natural that at least 30 other online firms are also targeting at least parts of the same market. Competitors include Nowdocs.com, based in Aliso Viejo, Calif.; Portland, Ore.-based Printbid.com; and Mimeo.com, Inc., a New York-based firm focused primarily on selling printed and bound corporate reports. There is also growing competition from other more general office supply vendors, such as Staples.com {SPLS}, as well as offline copy king Kinkos, which are both after essentially the same market.

None of iPrint.com’s online competitors, however, came close to its 247,000 paying customers during the month of January.

“iPrint has a distinct place in the online printing industry,” Shore says. “The company will need to form more new partnerships with traditional retailers, though.”

The company currently has a deal to supply online printing services to customers who visit OfficeMax Inc. {OMX}, and the company has a growing affiliate marketing program that encourages other Web-site operators to resell iPrint.com services on a commission basis.

One reason iPrint.com has won such a loyal following is because its prices are 30 percent to 50 percent lower than can be found in most neighborhood print shops. The company passes along to consumers the savings it achieves by not having physical brick-and-mortar retail shops. Its executive team has also eliminated many of the pre-press manufacturing steps typical in old-line print shops.

“If you look at our Web site, you’re really looking at the tip of the iceberg of what we do,” says iPrint president and founder Royal Farros during a recent industry panel discussion in San Francisco. “The big part of what we do is everything underneath it. We feel we have a very, very strong technological base.”

The company’s Web site, for example, automatically stores customer data so that repeat buyers don’t have to re-enter information, such as their address, logo or design preferences. Customers can also begin the design of a printed product one day and finish it on another.

“Remembering all of the data your customer entered is an excellent way to generate repeat business,” Shore says.

The movement toward online printing has been happening so fast that the conventional printers are sitting up and taking notice. Printing Industries of America Inc., the industry’s main trade group, for example, recently set up a task force to address the growing impact of online printing.

“Many of our members are now looking to see if they should change their business model,” says Ron Davis, chief economist at Printing Industries of America. “If they’re not seeing what’s coming down the line, they’re going to be hit by a freight train.”

The company posted a loss of $6.6 million on revenue of $1.7 million for the nine months ended Sept. 30, as compared with a loss of $1.3 million on sales of $306,000 for the same period a year earlier.

In addition, iPrint.com recently commenced a nationwide brand-building advertising campaign that should peak right about the time of its IPO.

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