cnbcs114

Blaze IPO Is a Flaming Success


by Hal Plotkin
Silicon Valley Correspondent

Analysts say a unique combination of technologies puts Blaze Software Inc. {BLZE} in a position to prosper, and investors seem to agree, bidding the stock up in its debut Thursday.

The stock opened at 35, after pricing its 4 million share offering at $16 a share late Wednesday, above its stated price range of $12 to $14.

“Blaze is really in a league of its own,” says Judy Hodges, program director at International Data Corp., based in Boston. “They have a leg up on others who are trying to do what they’re doing in bits and pieces.”

Mountain View, Calif.-based Blaze Software has taken a hybrid approach to e-commerce infrastructure development. The company serves the red-hot customer relationship management (CRM) market with a product that combines online personalization with the ability to propagate company-specific rules and procedures across all customer communications channels, including e-mail, call centers, Web sites and even stand-alone marketing kiosks.

It is difficult to find comparable IPOs, because of Blaze Software’s unique positioning within the overall CRM market. Other leading CRM players, however, include Boston-based Art Technology Group Inc. {ARTG}, which went public last July with shares priced at $12, and Redwood City, Calif.-based BroadVision Inc. {BVSN}, which went public in 1996.


Art Technology Group Ppost-IPO Stock-Performance Chart


BroadVision 52-Week
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“I think Blaze is going to also do well,” says Scott Nelson, vice president and research director at the Gartner Group, based in San Jose, Calif. “I tend to be optimistic about them. We really haven’t tapped into the true potential of personalization yet. Firms are looking for better and better solutions, and that’s what Blaze is hoping for.”

Personalization is quickly becoming the Holy Grail of online marketing, because of an increasing focus on customer-retention concerns, rather than just customer acquisition.

Personalization software enables an online merchant to recognize repeat visitors, suggest appropriate products and let them know whenever new products or services that might interest them become available, even if the customer doesn’t visit the merchant’s Web site.

Online merchants currently pay between 90 cents and $2.67 per visitor for large-volume marketing and ad deals with major online portals, according to IDC. Less than 1 percent of those visitors, however, become buyers, IDC says.

“It is essential for e-commerce merchants to preserve their relationships with existing customers,” says Juliana Nelson, senior analyst at IDC.

The overall market for Internet commerce-application software, which includes software for both business-to-business, or B2B, and business-to-consumer, or B2C, applications, is expected to grow to $13.2 billion by 2003, up from $1.7 billion last year, according to IDC.

In addition to the importance of personalization and the overall size of the addressable market, analysts say Blaze’s prospects are also likely to be boosted by the company’s emphasis on customer relationship management across all possible communications channels. The ability to integrate e-mail, call center, and Web-site customer contact and service records in a single system that is accessible to all customer-service personnel is the key ingredient behind sizzling stocks such as Kana Communications Inc. {KANA} and Silknet Software Inc. {SILK}, which recently announced their intention to merge.

Kana Communications Ppost-IPO Stock-Performance Chart


Silknet Software Ppost-IPO
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Blaze Software has another powerful ingredient. The company, which was originally incorporated in 1985 as Neuron Data Inc., has its roots in the highly complementary electronic rule generation and propagation market, which it helped pioneer. Neuron Data adopted the Blaze Software moniker last August.

The firm’s original products enable company executives to immediately distribute and enforce changes in corporate rules and procedures across multiple employee and customer contact points. The software is designed to keep all employees on the same page whenever internal rules change.

Analysts say the combination of rule-propagation software, personalization and cross-platform customer service coordination gives Blaze Software a potent arsenal in the battle to win business from companies building e-commerce sites. The company currently has in excess of 200 customers, with a strong concentration in the financial services sector, including Bank of America Corp. {BAC}, Citigroup Inc. {C} and Fidelity Investments. Other Blaze customers include Intel Corp. {INTC}, Matsushita Electric Corp.’s Panasonic unit and Sun Microsystems Inc. {SUNW}, which uses Blaze software for internal case management.

Erin Kinikin, an analyst with the Giga Information Group in San Jose, Calif., says she expects to see more consolidation in the CRM market, which could be good news for Blaze Software, as long as the company is either an acquirer or an acquiree.

Kinikin says Blaze Software is going public on the strength of its sales of highly customized products to its existing customer ranks. In the future, however, she says success will depend on “productizing” those services into packaged software that can be installed and used by customers with a minimum of support from the vendor. “It’s a little too early to tell how they will do at that,” she adds.

Kinikin also says the current state of personalization software remains mostly rudimentary, leaving plenty of room for competitive advances.

“Personalization these days is more of a series of one night stands than a real relationship,” Kinikin adds. “The sites remember your name, but they don’t really know a whole lot about you they should know. Blaze would argue their software is a much more sophisticated engine than anyone else’s. But it’s still early. Blaze certainly can’t sit still.”

“I think they’ll do reasonably well,” says Joel Yaffe, another analyst with the Giga Information Group. “It’s really an all-of-the-above company. They have a number of the important elements, a good customer base, a good management team and good technology.”

Blaze Software posted a loss of $17.2 million on revenue of $11.7 million for the nine months ended Dec. 31, as compared with a loss of $4.7 million on revenue of $6 million for the same period a year earlier.

List of Customer Relationship Management (CRM) Vendors

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