The Open Era: Andover.Net Readies Itself for IPO, Hambrecht Style

The operator of Linux-related sites is in a hot niche, but that doesn't mean it's likely to be the next Red Hat.
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Open source meets


. An investment bank devoted to democratizing the IPO process handling a company devoted to an operating system created by a community of developers. Sounds like a great match, right?

Maybe not. On Dec. 7 legendary banker Bill Hambrecht is scheduled to once again try to use his OpenIPO system to bring a small company public, in this case


content Web site


. But given

W.R. Hambrecht's

rocky IPO track record and Andover.Net's shaky foothold in the sizzling Linux sector, the deal faces long odds of becoming Hambrecht's breakout success.

Like Hambrecht's first two offerings,

Ravenswood Winery




, Andover.Net is a niche player. Incorporated in 1992, the Acton, Mass.-based company owns a network of Web sites, including


, a pair of news and information sites devoted to Linux, the open-source operating system. It caters mainly to programmers who use open-source software. Like most Net companies, it's deep in the red, reporting a pro forma loss of $11 million on $2.6 million in revenue for the year ended Sept. 30.

Andover.Net declined to comment, citing the quiet period.

Tip of the Hat

But it's in a very hot niche. A

slew of Linux-related offerings are getting ready to hit the public markets following Linux distributor

Red Hat's


spectacular 270% first-day pop on its Aug. 11 IPO. Similarly, Linux hardware company

Cobalt Networks


saw a 482% leap when it went public on Nov. 5.

As a result, analysts and investors are buzzing about Linux, and any offering associated with the open-source movement will have its supporters. "I think it'll be

Hambrecht's most successful IPO so far," says Ken Fleming, analyst with

Renaissance Capital's


IPO Plus Aftermarket fund. Citing policy, the fund won't disclose if it's planning to buy shares in the offering.

Even so, Andover.Net won't necessarily be the next Red Hat. Neither a hardware nor a software company, it seems to fall through the Linux cracks and in many ways is more of a straight dot-com offering. Hambrecht declined to comment on any aspect of the Andover offering.

Riding the Wave

Six months ago Andover.Net was a general information site for programmers, with sites like Web-building resource


and the

Internet Traffic Report

, which monitors data flow on the Web. It turned into a Linux company this summer when it acquired Slashdot in June and Freshmeat in August. And though the two sites are strong properties, the acquisitions prompted Linux developers to question whether Andover is just trying to capitalize on the hype surrounding Linux.

"Andover decided they were going to be a Linux company six months ago and started buying Linux Web sites," says Jonathan Corbet, a programmer who edits the

Linux Weekly News

. "I think they're trying to ride the Linux wave in general."

Andover "wasn't really known until it ponied up money and bought Slashdot and Freshmeat," adds Hadar Pedhazur, founder of the

Verticality Investment Group

venture capital firm and an active member of the Linux community. "Without taking that step they wouldn't be talking about an IPO now."

Slow Start

Chances are it'll take more than a little-known dot-com to improve 21-month-old W.R. Hambrecht's track record. Ravenswood Winery, a California vintner that was the first to test OpenIPO's unconventional Dutch auction

setup, hasn't ventured above 11, which is just a hair above its 10 1/2 offer price on April 9. The stock closed Friday at 10 5/8. "Historically wine stocks don't move much," said Hambrecht spokeswoman Sharon Smith.

It didn't help investors' confidence that W.R. Hambrecht itself has taken on about 600,000 shares, or 13% of the company. It's unusual for underwriters to use their own capital to support offerings in the IPO aftermarket to that degree. "We think it's a good long-term investment," says Smith., the San Francisco Internet publication that went the OpenIPO route on June 22, has fared less well. It opened below its 10 1/2 offering price and hasn't recovered. The stock closed at 6 5/8 on Friday, 37% below its offer price. "Salon is a little harder story for investors to get their arms around since it's an online magazine and Internet content company," Hambrecht's spokeswoman explained.

Hambrecht's third offering was

, an online gourmet food delivery service that postponed its

offering in August due to market conditions and has since fallen off the IPO map. According to Hambrecht's Smith, the company pulled its IPO after receiving private financing. declined to comment for this story.

But if the prospects for Andover.Net don't look great, at the very least OpenIPO should allow Linux developers to get in on the IPO. That may satisfy some people who complained they were shut out of the Red Hat IPO in August.