It looks like Utah's technology sector has finally entered the "Sideways Phase" phase of the recovery.
While much of the tech world in the United States has been in this Good News/Bad News/Neutral News environment for the past three to four months, it appears that Utah's entry was delayed, most likely due to a halo effect caused by the Olympics.
So on the good news side of the ledger, Utah's information technology sector saw its first initial public offering last week with the IPO of Lindon-based Altiris, Utah's first IT IPO in more than two years. (The most recent tech IPO before last week was Caldera's offering in March 2000.)
"But David," you cry, "Altiris' stock price dropped 13 percent on the first day of trading. How can that be a good thing?" True. But $50 million is still $50 million, and that's how much Altiris raised in the public marketplace by selling five million shares at $10 per share.
And although the company lost a significant amount of money in the first quarter of 2002, it also generated more revenue in the same three-month period than it had in the entire previous year. That's a good sign, and I suspect that as soon as Altiris turns the corner to profitability (Q1 of 2003 maybe?), the marketplace will recognize the company's real valuation.
The fact that Altiris was able to go public in a very soft IPO market is also a positive event in that even with barriers such as "lock-up periods," Altiris stock now provides a fairly liquid currency for all of its shareholders, including employees and its Utah-based financial backers: the Canopy Group and vSpring. And providing a liquidity event for any of Utah's limited group of active investing organizations is also a positive occurrence.
Also on the good news side of the ledger is the fact that GlobalSim (formerly KQ Corp.) landed another round of equity funding last week from Utah-based funding sources EsNet Group and vSpring. Although the amount of funding was not disclosed, this is the second time that both organizations have provided venture capital dollars to GlobalSim/KQ Corp., which happens to be one of the leading providers of simulation-based driver training and material handling systems, technologies and consulting services in the world.
On the bad/neutral news side of the ledger, several local companies (all former tech high-flyers) have either closed, are on the brink of closing, or are going through investor-forced transitions designed to save the company.
The news about one company is already public knowledge: WhizBang! Labs is closing down. Based upon a unique software engine for extracting very specific data out of Web sites, WhizBang! Labs raised $40 million in cash and services in early 2000 and landed another chunk of moolah when it sold off its very successful subsidiary, FlipDog, to Monster.com one year ago.
But in the end, as expressed in news reports published the previous weekend, it wasn't enough, and the company is going away.
Another company that appears to be on the verge of going away is Sandy-based Webmiles. This is another example of a great concept — build a customer loyalty program driven by allowing consumers to earn frequent flyer mileage points usable with any carrier — that seemed to be generating a lot of traction, visibility and partners. Even after successfully raising more than $40 million and landing one of the leading regional grocery store chains in the country as a customer (Ralph's), Webmiles was not in the position to handle losing one of its largest customers. So if one were to call the toll-free number for the Webmiles redemption center, you would be greeted with a recording that explains, "Regretfully we are no longer redeeming miles for travel."
In other words, in spite of dramatic efforts by company management, Webmiles has phased down into what might be called "hunker down mode." Most of its employees have been laid off, severance packages have been distributed, creditors have been paid, and the company apparently has enough cash in the bank to allow a subsistence level team to try and cut a deal that will allow the underlying technology, if not the company itself, to survive. And yet, I have one very good source that tells me that the company is slated to be shut down in June 2002, so we shall see.
The final Utah company I include in this list is what used to be known as Lineo. I use the term "used to be" because what was Lindon-based Lineo was forced into foreclosure recently by more than one of its creditors.
Its operating assets were acquired and folded into a newly formed company known as Embedix, the name used for the leading Lineo product line. In the process, the head count at Lineo was cut again, this time down to roughly 70 employees, with approximately 40 based in the United States and another 30 or so based in a wholly owned subsidiary based in Japan.
The important point about the Lineo-to-Embedix saga is this: the core assets still exist within an operating entity, customers continue to be served and will continue to pay for such services, and the company is now apparently staffed appropriately (assuming that near-term funding is available as promised) for the level of revenues the company is generating.
Does that help the people that have lost their jobs, whether that be at Lineo, Webmiles or WhizBang! Labs? Of course not.
But that appears to be the nature of this current economic beast. And for better or worse, Utah's tech economy also appears to be in the same sideways pattern as the rest of the country.
David L. Politis is the president of Politis Communications, a public relations, investor relations and marketing communications agency.
E-mail: dpolitis@politis.com