In Search of That Google-Like Glimmer

Vector and other buyout funds were presented with an unusually large number of undervalued tech companies in the darkest days of 2002 and 2003. "Those were uniquely good years for taking companies private," says Slusky. "But 2005 and 2006 will still be much better than average."

In the past year alone, Vector has added to its portfolio a few companies with names familiar to longtime tech investors. In July, it bought WinZip, the ever-present PC-file compression software, with the aim of leveraging its vast user base into stronger revenue. Since then, WinZip has signed a distribution deal with Google and integrated the program with Microsoft Outlook.

Last month, the firm paid $200 million for Register.com, which sought its fortune in the domain-registration niche and still holds on to a million small-business and individual customers. Corel, the maker of WordPerfect word processing program that Vector bought in 2003, is reportedly close to filing for another public listing. (Vector wouldn't comment on a potential IPO for Corel.)

None of these companies are a Google. These aren't even companies Google gives much more than a nostalgic afterthought to. They aren't the hot shots of the recently revived Internet sector. And that's the whole idea.

Of course, a buyout firm seeks to become the sole investor in a company. But the things it watches for are of interest to investors seeking a more sober approach to tech stocks: a strong customer base, a low price-to-earnings ratio, growing cash flows and a willingness to bring rigor into their operations.

Vector believes it's found a good candidate in Register.com, which has an opportunity to offer its customers more Internet services. Its cash flow from operating activities stood at $1.9 million on June 30 (the most recent figure before its buyout), up from about $100,000 one quarter earlier.