In recent weeks, e-business infrastructure companies have become as prized among investors as Pokemon cards are among their kids. And that's been nothing but good news for Vitria Technology (VITR) .
The developer of e-business infrastructure software, which went public in September at 16, has seen its stock quadruple in two months, closing at 190 Wednesday, up 4 1/4. Over the past six trading days, it's shot up about 90 points, or 90%.
And though Internet companies are prone to blaming daytraders when their volatile stocks drop, the company and a leading sell-side analyst insist that it's smart money that's pushing such stock up -- investors who are educated about the stampede by traditional companies going online, as well as Vitria's potential in this business.
Dash down some thoughts on our Nasdaq board
What's going on, investors say, is that we're at the beginning of a three- to five-year business cycle, one in which not just pure-play Internet companies, but also traditional bricks-and-mortar operations, are making sure they can conduct their business-to-business affairs online. It's the same belief -- that new technology is no longer just for dot-coms, but is integral to all companies doing business in the U.S. -- that's being used by investors everywhere to justify the
hair-raising recent ride. Of course, whether this argument justifies Vitria's recent flare-up or the Nasdaq Composite Index's 64% jump this year is another question altogether.
"People are piling a lot of money into e-business infrastructure, and Vitria is a direct beneficiary of that trend," says Wendell Laidley, Internet and e-business infrastructure software analyst for
Credit Suisse First Boston
, Vitria's lead underwriter. Laidley has a strong buy on the company.
Part of it is positioning. For most of its life, the 5 1/2-year-old company wasn't viewed as an e-commerce infrastructure company, says Alex Osadzinski, its vice president of marketing. Rather, it was seen as a company that helped firms take advantage of electronic data for internal use, he says. Now it's seen as a company that does something for which demand has exploded in the past six months or so, he says, that is, helping companies automate business processes not just internally, but with other companies -- automating transactions with customers, partners, distributors and suppliers.
That repositioning began with the company's original IPO filing in June, Osadzinski says. And following the company's emergence in mid-October from its post-IPO quiet period, it's continued to hammer on that theme, he says, attempting to put out a new press release about completed deals every week or so.
One of the important things that investors are seeing with Vitria, Osadzinski says, is that if one major player in a particular business market adopts Vitria's software, other companies do so also. So the company has been able to publicize several deals with customers in another hot technology market -- the business of rolling out high-speed, DSL telephone service. "You get this viral marketing effect in an industry where everyone is trading with everyone else," Osadzinski says.
It also didn't hurt the stock that the company made a presentation at CSFB's annual technology conference last week. Vitria's presentation, says Laidley, included new information about upsides to revenue estimates, potential customer wins, and how many deals it is pursuing. It was no coincidence that the recent run-up took place after Vitria's presentation on Nov. 30, Laidley says. And it was no individual-investor phenomenon, either. "It's not my opinion that retail investors are driving the stock price, because retail investors don't have as clear an understanding of what Vitria does, and there are no retail investors at the CSFB technology conference," he says.
The Gold Rush
One buy-side analyst, whose firm is a shareholder in Vitria, says the move toward e-business is reminiscent of the massive corporate rush two years ago toward enterprise resource planning software -- a product that he says perhaps hasn't delivered everything it promised in terms of productivity improvement. "This is the new wave," the analyst says. "Hope springs eternal."
Just as the analysts' comments indicate some skepticism out there regarding the promise of new technology, there's also got to be some skepticism about Vitria's stock price, which is trading in the neighborhood of 112 times estimated 2000 revenue. But it's hard to find. On Oct. 29, someone posted on the
message board, "VITR is definitely overvalued here. I just shorted this pig at 65. See you in the 40s where it belongs." In recent days, this has been good for a laugh on the board, as the remaining chatters speculate that the short interest in VITR has dried up or gone bankrupt.
Meanwhile, all the theories about why Vitria has risen remain just theories. "You must have heard the answer 5,000 times before," Osadzinski says. "We don't really know. But the story is getting out there."