Redherring.com
September 24, 1999
EGain Communications (Nasdaq: EGAN) launched a
stellar initial public offering Thursday, following a trail
blazed by a similar company the day before.
Ashutosh Roy and Gunjan Sinha,
cofounding head honchos of eGain,
an enterprise email-management
company, went shopping for cash
with a 5-million-share IPO.
Investors reacted with open
pocketbooks as eGain shares,
priced at $12 each Wednesday
night, opened Thursday morning up 187.5 percent at
$34.50.
As the broader Nasdaq Composite fluctuated, eGain
churned out a volume of 8.8 million shares, ending the
day at $23, a 91.7 percent gain. The tiny company's
market capitalization had zoomed to a whopping $612
million.
The strong demand was anticipated
by lead underwriting manager
BancBoston Robertson Stephens,
who with comanagers Donaldson,
Lufkin & Jenrette and Volpe Brown
Whelan, raised the offering price a
dollar from its initial filing range of
$9 to $11 per share.
EGain joins its rival Kana
Communications (Nasdaq: KANA), a similar software
company whose stock rocketed 243 percent in its first
day of trading on Wednesday, in the public market.
Other email-management competitors include Silknet
Software (Nasdaq: SILK) and the not-yet-public
Brightware.
PLENTY OF QUESTIONS
Mr. Roy was a cofounder of WhoWhere, an Internet
directory and communication-services company acquired
by Lycos (Nasdaq: LCOS) last year. He now holds sway
as eGain's CEO and chairman, with Mr. Sinha serving as
chief financial officer.
The Sunnyvale, California, eGain boasts two scalable
solutions that automatically organize and answer email
from customers of large corporations. The company's
Email Management System (EMS) is a Web-based
application that lets customer-service departments route,
track, and respond to high volumes of customer email
and Web-form inquiries. Its Web Collaboration System
(WCS) allows customer-service representatives to
answer customer questions and provide interactive
assistance over the Web using browser sharing, text
chat, and assisted form-filling technology.
According to the company, about half of its current
customers access the applications through its network.
Counted among those customers are dedicated Internet
companies such as Go2net (Nasdaq: GNET), Snap.com,
and WebTV, as well as traditional companies engaged in
electronic commerce, such as Mazda USA and FCC
National's Wingspan Bank.
Still, sales at the money-losing company are minuscule.
In fiscal 1999 ended June 30, two EMS customers, FCC
National and WebTV, together accounted for a quarter of
the company's $1 million in total revenue. Its net loss for
the year was $11.3 million.
In April eGain entered a stock-swap transaction, valued
at $20 million, to acquire Sitebridge, a producer of
Web-based collaboration-tools sites, including
Netdiscussion and Customernow, an application that
allows service representatives to offer live assistance to
customers through real-time Web interaction.
After the acquisition, eGain changed the name of
Customernow to eGain WCS. That means that as
recently as May, eGain did not have a funding source for
the stream that currently provides half of its meager
revenue. Five months after the deal, the company
embarked on the potentially expensive integration of
Sitebridge operations and assets. According to the
prospectus, eGain accounted for the transaction by
writing off $21.4 million in goodwill and other purchased
intangible assets. The gain is expected to be amortized
on a straight-line basis over the next three years. |
