Software Notebook: New Breed of Software Firms Heads for IPO Trough

SAN FRANCISCO -- Move over Internet companies. Software companies paving the way for older businesses to get on the Internet are hitting the road with their own initial public offerings. But the recent rush to the IPO gold mine is leaving some wondering whether there's enough room for everyone.

Software companies that help connect a firm's old back-end applications to its new front-end Web applications are poised to take advantage of a market that IDC predicts will grow to $11.6 billion by 2003 from just under $2.0 billion last year. Many are preparing by raising money through IPOs.

Vitria filed in late June and is expected to hit the market in mid-September between $10 and $12 a share. Vitria's debut will follow Tibco's (TIBX) IPO on July 14 at $15 and Active Software's (ASWX) a month later at $11.

Now Software Technologies CEO James Demetriades says he's nearly ready to join the fray. "We'll probably go public in the next six to nine months," he says, noting that the company has already chosen its bankers but declined to name them.

CrossWorlds, which was expected to be the hottest IPO in the space before broadly publicized troubles that included layoffs and talk of unusable products, has yet to file for its IPO. Demetriades and others say there's talk that CrossWorlds is gearing up for its own IPO. "That's probably why they aren't talking right now," says Kimberly Knickle, analyst at AMR Research. A CrossWorlds spokesman had no comment.

But even without CrossWorlds, this niche of the software market is quickly getting crowded -- so crowded that once all the companies in the space are public, investors could see an all-you-can-eat feeding frenzy. Knickle predicts mergers and acquisitions activity in this area could heat up in a year or two, after all these companies have come public.

No one is willing to venture a guess yet as to which company may get gobbled up first, but every company is trying to raise money and build its businesses before feasting day begins.

Toward that end, most have been lining up high-profile backers. Software Technologies has Andersen Consulting CEO George Shaheen on its board, while Active has Kleiner Perkins Caulfield & Byers -- one of the mightiest venture capital firms in Silicon Valley -- in its corner. Tibco CEO Vivek Ranadive boasts a star-studded lineup of investors including 60% by Reuters (RTRSY), 10% by Cisco (CSCO) and small stakes taken by Yahoo! (YHOO) and Sun Microsystems (SUNW) at the IPO.

Saved by the Sun

Just as Forte Software (FRTE) vice president of marketing Jonathan McKay was about to start a series of adventure stunts to tell the world that the software company was back on track, it got bought by Sun Microsystems.

The hardware maker said Monday it would buy Forte for $540 million in stock to broaden its products that help companies move to the Internet. Forte stock, which was already on the mend after hitting a low of nearly 2 last autumn, hit a high of 22 3/4 Monday. The stock closed unchanged Tuesday at 21 1/8.

A spokeswoman for Forte says for now, McKay has no plans to press on with his adventures, which included a bungee jump, swimming in a shark tank and a long-distance marathon to prove that Forte is being aggressive in embarking on a different kind of ride.

Pants on Fire

"One of these CEOs is looking you straight in the eye and lying through their teeth." That's one of Siebel (SEBL) CEO Tom Siebel's favorite lines when describing the rivalry between him and Oracle's (ORCL) Larry Ellison.

Siebel recently repeated it to a Reuters reporter in an interview about a well-publicized heated exchange of letters between the two companies about each other's marketing campaign. However, he went on to say that the matter was behind them because "the fact of the matter is they [Oracle] stopped the mudslinging ads that were illegal."

But is that fact or fiction? An Oracle spokeswoman says Oracle hasn't changed any of its marketing and continues to run the same ads it has been running.

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