SAN FRANCISCO (CNN/Money) -
Oct. 10, 2000, was undoubtedly a dark day at the WebSideStory headquarters in San Diego. That's when the Web site analytics firm filed its Request for Withdrawal of Registration, an official retreat from its first attempt at an initial public offering.
That reversal made plenty of sense, given the generally southward movement of the market at the time and the simple fact that WebSideStory had yet to make a dime of profit.
May 27, 2004, then, must have been a sunny day indeed for the firm. On that day, the company signaled its renewed intention to go public.
Representatives from the company won't talk because they're now in their pre-IPO quiet period, but I'm guessing that the big question around the company watercooler is whether the second time's the charm.
For investors, the question should be, Is WebSideStory really ready to go public, or is this just a matter of improved market conditions?
The market or the company?
Of course, the economy is much brighter than it was four years ago. Employment is slowly trending up, as is productivity, and the general consensus among economists is that the nation is heading out of a recession. And with the recent spate of tech-related filings and IPOs, it's clear the market is warming to technology stocks again.
"The market is doing OK these days, and the market for IPOs is good, excluding biotechs," says Jeffrey Hirschkorn, president and co-founder of Current Offerings. "Technology will be very hot going forward."
So, what has WebSideStory done during the past four years that makes it a more attractive offering than it was in 2000? And should investors pay attention?
The answers are "Quite a bit" and "Yes."
First, the company has finally attained its first quarter of profitability -- a milestone it reached almost at the same time as its filing.
"People are reluctant now to buy stocks with heavy losses," Hirschkorn says. "If you have heavy losses, the eagle eyes are out."
Given that the company relies on a subscription model with contracts expiring throughout the year, however, there's no guarantee that revenue and profits will continue to flow.
Still, the company's revenue growth has trended up since 2002, while its operating costs have held relatively flat. And its market is poised for growth: IDC expects the Web analytics market to increase from $257 million in 2003 to $418 million in 2007.
Changes since the last attempt
What's more, since its last attempt to go public, the company has almost tripled its customer base, going from 180 customers in March 2001 to more than 500 in March 2004.
And its client list is now loaded with blue chips, including AT&T, Best Buy, Cisco Systems, DaimlerChrysler, Federal Express, Nokia, and Sony.
Investors should note, however, that WebSideStory desperately needs to diversify its product portfolio. It is, in the truest sense of the phrase, a one-trick pony. Its HBX service, which provides customers with Web site analysis such as traffic patterns and usage statistics, accounts for 98 percent of the company's revenue.
Finally, WebSideStory could find itself on the wrong side of that classic technology dilemma: Are you a sustainable business or just a software application? Competitors such as DoubleClick and NetIQ already offer some mix of analytical tools for Web sites.
While WebSideStory's product is, as they say, robust, what are the company's options if other firms start adding to their analytical tools and bundling them with other applications?
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