Ericom Software

went public on the Tel Aviv Stock Exchange exactly one year ago and has won the dubious distinction of being the worst IPO of the year.

Since its IPO in March 2000, when Jerusalem-based Ericom raised NIS 30 million, its share price has dived by 95%, lowering its market cap to $2.6 million.

The company's market cap is significantly below the cash it has in hand, which totaled NIS 26 million at the end of 2000.

The company's financial statement released today explains why the company's market cap sank so low.

Not that its controlling shareholders, the Heyman family, are losing any sleep. They also sold shares when the company went public, also raising NIS 30 million. The Heymans also emptied out Ericom's coffers right before the IPO, withdrawing dividends of NIS 15 million.

As if that weren't enough, Eran Heyman withdrew NIS 1.1 million, or an eighth if the company's market cap, as owners' wages. CEO Shmuel Rabina was more modest, requiring only NIS 1 million salary a year.

Moreover, revenues continued to steadily erode, dipping from NIS 3 million in the parallel to NIS 2.95 million in the fourth quarter of 2000. On the hand, losses grew from NIS 3 million to NIS 3.33 million in the fourth quarter.

Ericom ended the year with revenues of NIS 14.7 million, down 34% from 1999. It lose NIS 10 million for the year, compared with NIS 4.5 million for 1999, explaining why investors have punished the share so badly.

Ericom explains that its erosion is due to slowing sales in the United States and Western Europe. But Ericom's slowdown began in the second quarter of 2000, a time when most software houses were blooming.

The company develops, markets and sells host access software products, enabling home PCs or mobile computers to access central computer systems. In 2000 Ericom began developing technologies and products to adapt legacy computer systems to Internet.

Ericom's field is highly competitive, and has also been undergoing deep change as enterprises shift from central computers to Web-based systems.

In conclusion, Ericom concurs that the industry is in crisis, but sees itself weathering the troubles and coming out stronger. How? As enterprises indulge less in the latest technology, the importance of their legacy systems increase. Enter Ericom, whose solutions enable the enterprises to improve the utilization of their computer resources.