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Autonomy Corporation


is hoping there will be no scares this Halloween when it lists a secondary offering of shares on the

London Stock Exchange


However, in today's turbulent times, even a much-loved software company like Autonomy can't be certain. In an attempt to ensure nothing untoward happens, the firm is announcing contracts and making strenuous efforts to counter recent criticisms about the offering.

On the face of it, Autonomy shouldn't have too much trouble finding buyers for the 6.6 million of existing shares it's putting on the market next week. While everything was falling around it on Wednesday, Autonomy managed to rise 2.9% to $49.50 on the back of an announcement that the company is expanding into Japan through an agreement with

NTT Software

. The shares were trading unchanged on Thursday.

The deal means that NTT Software will join companies like







Sun Microsystems

as distributors of Autonomy's software, which automates such labor-intensive tasks as archiving and hyperlinking the huge amounts of unstructured information on the Internet, in emails and in documents. The Japanese deal is yet another example of the software's ability to function in any language, based as it is on algorithms rather than alphabet.

Together with agreements with original equipment manufacturers, or OEMs, and vendors such as


, which embed Autonomy's products in their own software, Autonomy increased its revenue by 165% in 1999 and is expected to grow it by 187% this year to $63 million. According to a survey of brokers by


, Autonomy will have earnings of 6 cents per share, compared with a loss of 1 cent last year.

Needless to say, such growth doesn't come cheap. Autonomy's shares have risen over 3,900% since listing just over two years ago, and the stock is trading on a 2000 revenue multiple of 98 times.

However, that is unlikely to put off too many UK institutions, some of which have been unable to purchase Autonomy shares, while they were only listed on




. With a current market capitalization of $6.2 billion, the company will be included in the

FTSE 100 index

, when the constituents are reshuffled in December, and so index funds buying alone will likely swallow up most of the shares.

"Admittedly it's not the best time in the technology market but this is a blue-chip stock so the offering should go pretty well," believes Darren Lauber, an analyst at

WestLB Panmure

, which has performed no investment banking services for Autonomy and rates the stock a buy.

Neither will an apparent decline in its U.S. revenue nor criticism over the way the offering has been structured put a dint in the sale of these shares.

The sellers of the shares are

Apax Partners

, a venture capital firm and one of the original investors, and the founder and CEO of Autonomy, Dr. Mike Lynch. The sale of the shares could raise around $334 million, with Lynch's part worth about $60 million.

The company is currently in a quiet period, but people familiar with the company strongly deny that this is sending the wrong signal to the market. "Bear in mind that Apax made this investment in 1994; it is not an institution but a venture capital firm. Frankly, I'm amazed they have held on to it this long," one said. Of the selling by Lynch, the same person noted that even after taking into account this sale, Lynch would still have over $1 billion in the company. Lucky him.

The decline in U.S. sales is more worrying, given that 51% of Autonomy's revenue is derived from there. In a research report last week, Derek Brown, an analyst at

Robertson Stephens

and a known bear of the company (though he still has a long-term attractive rating on it), cites from the prospectus accompanying the sale of the shares that there was a 14% sequential decline in U.S. sales in the second quarter.

True enough. Yet the company would be correct in pointing out that in the first quarter, Autonomy won a $2.3 million contract with

General Motors


out of total revenue of $11.7 million, causing a spike in the revenue for that period.

Brown would appear to acknowledge this when he says, "We believe that Autonomy's quarters are likely to remain lumpy for at least into the

second quarter of 2001 and for that reason would not be surprised to see deals slipping from one quarter to the next."

For investors, these arguments are likely to be largely academic. The fact remains that Autonomy's shares have shown a meteoric rise and missing out on that was, to many, a nightmare they'd rather not repeat.