News > Technology
Wall St. hopes for a homer
June 2, 1998: 3:09 p.m. ET

Cleveland Indians get set to go public in a ho-hum week for tech IPOs
graphic graphic
SAN FRANCISCO (The Red Herring) - Wall Street might still be hoping for a homer off the foul pole, but a suicide squeeze might be the best that IPO players are able to offer.
     In another ho-hum week for technology's initial public offerings, only two pricings are attracting any measure of interest: the Ultimate Software Group and The Intercept Group. The Cleveland Indians are also on deck with the first-ever public offering for a professional baseball team. But as analysts have noted, professional sports franchises tend to lose more money than even most high-tech startups.
The PeopleSoft of the minors

     The Ultimate Software Group, a human resource management and payroll software company, has attracted some interest in this week's public offering market because of its positioning in the booming field of enterprise software. With 1997 losses of $15.5 million on sales of $14.1 million, Ultimate is still very much in its development phase, but analysts appear confident that the company has the potential to be a future player in its field.
     "We like Ultimate," said Mark Basham, IPO analyst with Standard & Poor's. "Revenues have doubled over the last year and it appears that the company is coming on strong." Although Basham notes that the company will not turn profitable until late 1999, or possibly into 2000, he says "the big part of the story is the marketwide growth in the enterprise software business, which means there's lots of room for a lot of players."
     Two other key components in Ultimate's favor are its solid management team which includes several veterans from ADP and its network of strategic partners, which include Lotus, a division of IBM (IBM), and Platinum Software (PSQL). "It's these partnerships which really expand their network of potential customers," says Basham who expects the public offering to gain 10 to 20 percent on its first day of trading.
     Basham cautions that as the broader market experiences further declines, so too will the IPO market feel the pinch. "My expectations have really pulled back," says the analyst. "That's why I was saying only a 10 to 20 percent for Ultimate. It could have been a lot better, but not in this market."
     The $39 million, 3.25 million-share offering is being underwritten by Donaldson, Lufkin & Jenrette and Volpe Brown Whelan & Co. and is set to price in the $11 to $13 range.
Not too crazy about Intercept

     The Intercept Group provides electronic funds transfer, data communications management, and client/server enterprise software to financial institutions, primarily over private frame relay networks. The fact that Intercept's clients are mostly community investment banks and the fact that its software is based on proprietary standards has some IPO watchers skeptical.
     "I suppose there might be a market out there somewhere for what Intercept does," says Basham of S&P. "But I for one am not to keen on the proprietary nature of their solutions." Basham notes that Sterling Commerce (SE) and many of the other large systems integrators offer standardized systems, while Intercept does not.
     Nonetheless, with 1997 sales of $20 million and a 1997 loss of only $600,000, Intercept's financials don't look too shabby.. "I just don't know if it's a market I'd want to be in," concludes Basham. Fair enough.
     Intercept will be offering 2.525 million shares at $10 to $12 a share, for a total offering amount of $27.8 million.
Well, there's always baseball

     In one of the more unusual, albeit highly anticipated, initial public offerings of the year, the Cleveland Indians will be heading into Wall Street's ballpark to become the first Major League Baseball team ever to hit the public markets. While we acknowledge that dedicated tech-heads might not be interested, analysts are actually bullish on this offering -- even if professional sports teams are historically money-losing enterprises -- expecting that the novelty value and support of its fans will carry it higher.
     Just for history's sake, reading this prospectus offered a quick trip back in time. The Indians' history goes back to the turn of the century, when the team became a charter member of the American League. After years of poor performance both on the field in the front office, the Indians were acquired by brothers Richard and David Jacobs in 1986. The Jacobs' turnaround strategy led the team to American League pennants in 1995 and 1997, as well as a decent season in progress for 1998.
     What does Basham think of the Indians as a hedge against technology's current poor performance? "Sports teams don't typically make a lot of money," says the analyst. "But at least it has a lot of fans across this great land of ours." God bless America.
     The Ultimate Software Group
1997 Sales ($ mil.): 14.1
1997 Income ($ mil.): (15.5)
Filing date: March 13, 1998
Expected IPO date: Week of June 1
Shares offered (mil.): 3.25
Offering amt. ($ mil.): 39.0
Proposed offer price: $11.00 to $13.00
Proposed Symbol: ICPT
Proposed Exchange: Nasdaq
Underwriters: J.C. Bradford & Co.; Wheat First Union
     The Intercept Group
1997 Sales ($ mil.): 20.0
1997 Income ($ mil.): (0.6)
Filing date: March 3, 1998
Expected IPO date: Week of June 1
Shares offered (mil.): 2.525
Post-offering shares (mil.): 9.0
Offering amt. ($ mil.): 27.8
Proposed offer price: $10.00 to $12.00
Proposed Symbol: ULTI
Proposed Exchange: Nasdaq
Underwriters: Donaldson, Lufkin & Jenrette Securities Corporation; Volpe Brown Whelan & Co.Back to top


Goldman moves near IPO - June 1, 1998


Welcome to the Red Herring Online!

Ultimate Software Group

The Intercept Group

Note: Pages will open in a new browser window
External sites are not endorsed by CNNmoney