The Day Ahead: Niku leads IPO parade
Today Niku steps up to the IPO plate with eight million shares expected to price in the $20 to $22 (£12 to £13) range. In an indication of strong demand, Niku, an information technology services company, has doubled the price range from $10 to $12 (£6 to £7) last week. Blue-chip underwriter Goldman Sachs should also push this offering into the stratosphere.
Niku shares the stage with Avenue A, MatrixOne and Net.Genesis. All four IPOs should do well in their market debuts.
Through its software and online marketplace, Niku allows professional services companies to share knowledge, learn from past mistakes and manage IT projects so that they are done on time and on budget. Target markets for Niku include consulting, financial services, medicine, law, engineering and advertising. The company also provides an online marketplace for services.
Niku's business isn't glamorous, but it could be vital to services companies. According to the US Department of Commerce, the gross domestic product of the professional services industry -- including business, health, legal and educational services -- exceeded $900bn (£558bn) in 1997.
That's a big market to chase, and Niku has already enlisted some big-time tech players as customers. The company counts consultants Comdisco and Inforte as customers. It also has Business Objects, Computer Associates, EMC and Gateway on its client list.
Niku is likely to ride the same wave that's currently carrying services businesses. As services demand soars, Niku's addressable market will grow accordingly. The market for business-to-business electronic commerce for services is estimated to grow from $22bn (£13bn) in 1999 to approximately $220bn (£130bn) by 2003, according to Forrester Research.
In filings, Niku said its goal is to be the "leading provider of Internet software products and online marketplaces for the sourcing, management and delivery of professional services". The company plans on getting there by boosting its customer base, enhancing its Web site and services marketplace, and targeting industries such as finance, medicine, law and advertising.
Niku has big plans, but also has some big losses. As of 31 October 1999, the company had an accumulated deficit of $16.6m (£10.2m) and three customers -- USinternetworking, Sybase and SalesLogix -- accounting for half its revenue.
Including recent acquisitions, Niku lost $32m (£19m) for the nine months ending 31 October on sales of $12.3m (£7.6m). Niku bought Proamics in December 1999 and Legal Anywhere in January 2000, and will carry goodwill expenses for the next three to five years.
Niku, which became an incorporated company in January 1998, is in the early stages of its development, to say the least. In its regulatory filings, the company said it competes against a lot of players. For starters, it competes with internal IT departments and in-house developers. And then there's the rest of the tech crowd, which competes with Niku on various levels.
Niku cited developers of professional services automation software and related Internet-based applications; providers of hosted software for IT consultants; operators of Internet-based job boards; developers of project management software; and enterprise resource planning software companies as current or future competition.
In a nutshell, Niku could compete against a wide range of players that includes Hotjobs.com, Oracle and PeopleSoft.
The good news -- at least for Niku -- is that no company has put together all the pieces yet. Niku also has a seasoned management team -- chief executive Farzad Dibachi was chief of Diba, an information appliance company that was sold to Sun Microsystems. Add it all up, and Wall Street could bet big on Niku.
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