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Focus: Where will AvantGo?
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September 25, 2000: 11:44 a.m. ET
Wireless infrastructure and content firm looks to build on Omnisky's success
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NEW YORK (CNNfn) - Standing in the middle of Times Square where dining options nearly outnumber neon signs, a famished tourist reaches for his Palm Pilot hoping to navigate his way through the urban maze and find some inexpensive American fare a bit off the beaten path.
It is a scenario executives at software developer AvantGo hope will soon play out in cities across the country as tech-savvy Americans look to obtain more and more pertinent information by simply touching a few keys on their handheld device or wireless phone.
But while AvantGo may be able to help you discover a hot new club on Manhattan's east side, the company's ability to navigate an increasingly tricky IPO market for wireless companies remains to be seen.
Ever since AT&T Wireless' $10.6 billion initial public offering in April, wireless deals have suffered after going public. Yet analysts believe the relatively new sector of the wireless Internet service companies, which provide all kinds of content to Web heads on the go, may have what it takes to bring back strong first days.
Internet anywhere
AvantGo provides Internet content from a variety of sources, including CNNfn.com, to personal digital assistants or cellular phones. This means with AvantGo's software customers can surf their favorite Web sites from Palm Pilots or certain Web-capable phones. But the company's main source of revenue is licensing its mobile computing infrastructure software.
While it's certainly not a guarantee of a great first day, analysts say tech and gadget companies tend to generate interest. Last week OmniSky (OMNY: Research, Estimates), one of AvantGo's competitors, bucked the trend for wireless offerings and jumped a surprising 47 percent.
According to analysts, with nobody sure exactly where the mobile Internet market is going, young companies can do well with investors willing to take a risks -- a theme that drove the IPO market to new heights earlier this year. OmniSky's wireless national service has only been around for six months.
AvantGo hopes to raise about $55 million, pricing 5.5 million shares on Tuesday between $9 and $10 with lead manager Credit Suisse First Boston.
Steve Tuen, analyst with IPO Value Monitor, said he expects the stock to do well initially, pointing to the strength of OmniSky.
"There's big interest in mobile Internet," Tuen said. "The company looks pretty attractive at $10 per share and they're under Credit Suisse, a very strong underwriter."
 Tuen said one dark cloud hanging over AvantGo's success could be the weakness in the Nasdaq.
Irv DeGraw, research director at WorldFinanceNet.com, was not so sure about AvantGo's longer-term performance and had concerns about such a young company going public.
"This company is long on promise and short on performance," DeGraw said. "It's a typical premature offering."
AvantGo was founded in 1997, but first saw significant revenue in 1999.
According to DeGraw, companies in this sector do well initially but don't follow through with consistent rise in share price.
"[Both AvantGo and OmniSky] are going to rise on the early buzz, but it doesn't last long and is followed by pretty bad erosion," he said.
Infrastructure and content delivery
San Mateo, Calif.-based AvantGo is a young Internet company and predictably runs at a loss. In 1999, the company had $4.32 million in sales, mostly from licensing fees, and lost more than $14.1 million. According to SEC filing, the company had a deficit of $30.5 million as of June 30, 2000.
The company is pushing for more revenue from its AvantGo Mobile Internet service, which allows users to pick a variety of Web sites to be delivered to their handheld devices.
The company currently has 1 million registered customers.
Tuen said the company is relying on the same business strategy as streaming audio company Real Networks, giving away software and relying on corporations who want to provide a service to wireless customers for revenue.
In this area, AvantGo faces tough competition from the aforementioned OmniSky, Oracle Corp.'s Portal to Go service and Palm Inc.'s Palm.net. 
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AvantGo
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