Fortune magazine has published a list of its hot IPO tips for 2008. Three out of the five – MySQL, Ingres and SugarCRM – are open source companies, while another – Parallels – is an open source project sponsor (for the record, the other Fortune tip is ExactTarget). Here’s a look at Fortune’s assessment of the four open source-related vendors, together with a quick 451 CAOS Theory view, and a terrible pun.
I should probably state for the record that I have no knowledge of the IPO plans of these companies beyond that which is presented below, and the assessment of their potential is my own.
Fortune says: “One of the most anticipated tech IPOs of the coming year, MySQL is the leading open-source database company on the planet. Its software might not have the bells and whistles of Oracle 11, but it also comes at a much cheaper price. According to the venture capitalist lunch chatter, MySQL is expected to file very soon.”
CAOS Theory says: MySQL has been talking up its IPO credentials for some time, and a 2008 offering was always more likely than 2007. The plan has not changed as far as The 451 Group is aware. What has changed is that the company has stopped being so open about its financial performance, which is typical of a company preparing to go public. Previously the company publicly claimed revenue of $50m in 2006 and $34m in 2005. Expect an IPO sooner rather than later.
Fortune says: “From 30,000 feet Ingres looks like a competitor to MySQL, but actually focuses on another part of the database food chain that is more competitive with Oracle. Another open source company, it has the heft, approaching $100 million in revenue and is cash flow positive. It is widely expected to file for a public offering by mid-year.”
CAOS Theory says: Like most private companies, Ingres does not talk publicly about its financial performance, but we expect that situation to change as it provides more information for comparative purposes as MySQL’s figures become public via the SEC. Is Ingres “approaching $100 million in revenue”? It is certainly heading in the right direction with 100% growth in new business and 70% year over year growth in total bookings in the 12 months ending July 2007. Even though, as Fortune states, Ingres is a very different business from MySQL, whether it is likely to go public as soon as mid-year would very much depend on MySQL’s IPO performance, in my opinion.
Fortune says: “Yet another open-source company, it offers, as its name suggests, software for customer relationship management, things like sales force automation and customer support. It is also on-demand. Think of it as an open-source version of SalesForce.com. The word is that it is cash flow positive.”
CAOS Theory says: SugarCRM began talking up its IPO prospects in August last year, with CEO John Roberts telling News.com the company intended to go public within two years. Revenue for 2007 was expected to double to $15m, according to Reuters, and revenue targets were set at $25m and $100m, according to The VAR Guy. However, the company also just raised $14.5m of a $20m Series D funding round, leaving one of its own advisers confused. That deal suggests talk of a IPO this year is premature.
Fortune says: “The virtualization technology company has more than doubled revenues every year for the past eight years, so it’s got the track record. And its products are giving VMware a run, especially in the small- and medium-business marketplace. Just find someone who uses Parallels and they will not stop gushing about it. Given VMware’s successful IPO, you can bet the SWsoft executive team and their investors including Intel Capital, Bessemer Venture Partners and Insight Venture Partners are looking hard at their IPO options in 2008.”
CAOS Theory says: Given VMware’s successful IPO it was inevitable that the company formerly known as SWsoft would be tipped to follow its virtualization rival public. Indeed the name change announcement certainly got tongues wagging. However, the company has also been talking about an IPO since 2005, and it faces a number of distractions this year. Not only is the company in the midst of a corporate re-branding it is also repositioning itself as a cross-product virtualization management provider, and is digesting three separate acquisitions. Under those circumstances it would take a brave company to also push for an IPO. But then I guess you could say Fortune favors the brave. (Sorry).