IBeam IPO Makes Modest Debut
IBeam IPO Makes Modest Debut
By Hal Plotkin
Silicon Valley Correspondent
Analysts say iBEAM Broadcasting Corp.’s {IBEM}big initial public offering could help the streaming media-delivery company become a ubiquitous part of the fast-growing broadband Internet infrastructure.
The IPO has made a modest debut, trading up about 3/4, after pricing at $10 Wednesday night at the mid-point of its $9 to $11 range.
Post-IPO chart for IBEM
Sunnyvale, Calif.-based iBEAM is pioneering satellite-based delivery of streaming media on the Internet. The overall market for streaming media delivery is expected to triple in size by next year, with nearly half of all commercial or business Web sites offering some form of streaming media, according to Dataquest, based in San Jose, Calif.
“IBEAM is off to a good start,” says Sujata Ramnarayan, streaming-media analyst at Dataquest. “The ability to deliver quality, reliable streaming media could open up many other opportunities.”
Those additional opportunities might, for example, include the delivery of full-length movies online, or becoming a preferred Internet broadcasting platform for live concerts and other major events.
Like its ground-based competitors Akamai Technologies Inc. {AKAM} and Digital Island Inc. {ISLD}, iBeam operates a data-transmission network that speeds the delivery of content over the Internet. CNBC.com has an equity investment in Digital Island.
Although both Akamai and Digital Island’s stocks lost substantial ground during the recent technology-sector slump, analysts say their still-healthy valuations work in favor of iBeam’s pending IPO since iBEAM takes some of what those companies do to the next level.
Unlike Akamai and Digital Island, both of which focus on speeding the delivery of all forms of Internet traffic, iBeam concentrates exclusively on enhancing the delivery of streaming media, using satellites to beam such traffic to Internet servers located as close as possible to end-users who have requested the transmissions.
IBeam’s approach to delivering streaming media essentially leapfrogs much of the cumbersome, complicated interlocking hard-wired Internet in order to give Internet-based streaming media videos and audio transmissions more of the look and feel of traditional high-quality television and radio broadcasting. IBEAM uses rented time purchased from an undisclosed satellite-communications firm to send streaming-media data packets to its own distributed network of servers scattered in strategic locations around the Internet.
“I think iBEAM has a compelling story,” says Joel Yaffe, an analyst at the Giga Information Group, based in Boston. “What iBEAM does is very well-suited to meeting the needs of media companies.”
Yaffe is particularly impressed by the recent news that iBEAM has entered into a letter of intent with Richard Li’s Hong Kong-based Pacific Century Cyberworks Inc. {PCCLF} to speed the delivery of streaming media throughout Asia, India and the Middle East.
Li, the 33-year old son of a Hong Kong land tycoon, has quickly become one of the key players in Asia’s emerging Internet economy.
“When I read that iBEAM had hooked up with Richard Li. it seemed to me they had gotten in bed with exactly the perfect partner for that region,” Yaffe says. “That alliance increases iBEAM’s value proposition substantially. There are a lot of others who are or will be trying to do what they are doing here in the U.S. But few can boast of the same strength outside the U.S. Anytime you increase the target market, you can take a bigger cut of the business.”
Yaffe says iBEAM’s deal with Pacific Century Cyberworks is even more important than the firm’s much ballyhooed arrangement with America Online Inc. {AOL}, which allows iBEAM to co-locate servers within AOL’s network in order to speed delivery of streaming media to AOL members, who constitute roughly one-fifth of the entire global Internet.
“The arrangement with AOL is definitely important and to their advantage,” Ramnarayan says. But she also notes the deal isn’t exclusive in any way and that other competitors are also placing their servers within AOL’s extensive data network.
“I think the AOL deal is a huge win for iBEAM,” counters Kevin Hause, an analyst with International Data Corp. in Mountain View, Calif. “As AOL gets more into streaming media, which is on the road map, it will create a huge market opportunity for iBeam. Literally half or more of the online U.S. population are on AOL.”
Hause says iBeam’s strength is its focus on streaming-media delivery, as opposed to all other forms of Internet traffic.
“Streaming media is the ideal application for this,” Hause says. “It’s a technology that is very latency-dependent,” he says, adding that unlike other Internet traffic, streaming-media transmissions must be delivered at a relatively constant, reliable speed in order for the broadcasts to arrive in good shape. “The focus on streaming media is very smart,” he says.
It is so smart, in fact, that analysts say iBEAM can count on facing increasingly stiff competition from a variety of quarters, including from more traditional land-based content-delivery expeditors, such as Akamai and Digital Island as well as, potentially, from the major existing television networks and others.
“It’s possible we may also see the broadcasters use the new digital spectrum they’ve been awarded by the [Federal Communications Commission] to do streaming-media delivery,” Ramnarayan says. “IBEAM will have to be looking at that and possibly dealing with that to be successful.”
In addition, Intel Corp. {INTC}, an iBEAM pre-IPO investor, recently announced its own similar initiative to speed up the delivery of all forms of data on the Internet, including streaming media.
“Right now there is a tremendous amount of interest in streaming media,” Hause says. “Intel’s announcement could be very significant.”
Additionally, it is possible that the three big streaming-media companies, Apple Computer Inc. {AAPL}, Microsoft Corp. {MSFT} and RealNetworks Inc. {RNWK}, may themselves also move toward creating or leasing their own similar satellite-based delivery systems.
“We’re going to see a lot of consolidation moving forward among Internet content-delivery players,” Hause says. “Companies like iBEAM could be tremendously successful and could become the next Columbia or Universal, the next big broadcaster. But they could also be out-maneuvered by other larger companies. It’s not going to be an easy battle to win, but if broadband continues to develop at its current pace, there will be plenty of demand for several of these companies to share.”
IBEAM, which was established in March 1998, posted a pro-forma loss of $44.5 million on revenue of $2 million for the first quarter, as compared with a pro-forma loss of $68 million on revenue of $5 million for all of 1999.
IBEAM’s investors include Intel, which owned 13 percent of the firm, and Microsoft, which owned 9.7 percent, prior to the IPO.
