$72 million day enjoyed by AppNet

6 million shares sold for $12 each in company's IPO

Stock closes unchanged

Company out to create an e-commerce titan by buying niche players

Electronic commerce

June 19, 1999|By Mark Guidera | Mark Guidera,SUN STAFF

AppNet Systems Inc., a Bethesda company that is less than 2 years old but hopes to emerge a dominant player in the exploding electronic commerce industry, went public yesterday, raising $72 million.

The company sold 6 million shares, or a 20 percent stake, at $12 each. The shares closed unchanged on the Nasdaq stock market, reflecting the recent cooling trend for Internet-related issues.

The company, which helps companies set up and maintain computer systems that allow them to conduct business over the Internet, said in its filing for the initial public offering that it posted a $15 million loss on revenue of $17 million in 1998.

AppNet said in its security filing that it had a $81 million pro forma loss on revenue of $69 million if the finances of companies it acquired this year and last are factored in.

Since being founded in late 1997 by former Wang Industries executive Ken Bajaj, the company has embarked on a roll-up strategy, acquiring 12 electronic commerce and Internet service providers nationwide.

Those purchases were backed by a $100 million investment from Chicago-based GTCR Goldner Rauner LLC, which specializes in financing mergers and acquisitions.

AppNet said it planned to purchase niche players in the industry rather than build from scratch so it could quickly build a company capable of providing the array of specialized skills needed to handle complex work for large companies.

Security regulations barred executives of the company from commenting on the offering yesterday, but Bajaj in an interview last July predicted that the com- pany could see revenue rise to $150 million by the end of this year.

"Every major corporation will want to leverage [electronic] commerce either for business-to-customer transactions or business-to-business relationships," Bajaj, 57, said. "E-commerce is going to be essential for being competitive."

Analysts say the company's plan to become a leading player in the fast growing electronic commerce industry is ambitious, and that AppNet faces established competition from such companies as Broadvision Inc., Open Market Inc. and Sterling Commerce Inc.

But analysts also note that opportunity will abound in the next several years as the market for e-commerce services grows significantly. International Data Corp., a research company, projects that the e-commerce market will grow to about $44 billion by 2003, up from $4.6 billion in 1997.

In its filing for the offering, AppNet said it has completed more than 500 projects for more than 200 clients, including Dial Corp., Ford Motor Co. and Baxter International Inc.

The company said it has offices in 14 U.S. locations, including in or near Boston, Denver, Detroit, Los Angeles, New York and Washington.

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