Some Firms on Slow Track To IPOs

FRAMINGHAM (04/24/2000) - Imagine a technology firm with a stable product, customers and profits that chooses not to go public. It happens.

Take data warehouse vendor SAS Institute Inc., for example. Raising cash was never an issue for the Cary, North Carolina-based company, which has hundreds of millions in cash reserves.

"One main reason companies go public is they need the money," said SAS co-founder and CEO James Goodnight. "And we just plain don't need the money."

But after years of reticence, SAS plans to place 15 percent of the company's stock in an initial public offering (IPO) within 12 to 18 months, Goodnight said.

The IPO is aimed, in part, at helping SAS retain and reward employees and at making recruiting new talent easier, said Goodnight, who holds a majority stake in the firm along with co-founder John Sall.

Although Goodnight boasts that the company's employee turnover rate is a mere 5 percent, he acknowledges that his firm gets "cherry-picked by the dot-coms" that offer stock options to new recruits.

SAS is the world's largest privately held software company, with annual revenue of more than $1 billion and 23 consecutive years of double-digit revenue growth on an annual basis. The company's revenue grew 17 percent from 1998 to 1999, Goodnight said.

Analyst Mike Schiff at Current Analysis Inc. in Sterling, Virginia, said companies such as SAS face the problem of losing employees from companies they have acquired.

"You need equity for acquisitions," he said. "SAS is not hurting for dollars, but if you're going to keep the staff from a company that you acquired, you have to give them options to stay.

"Going public also puts you in the spotlight," he added. "It's great exposure."

Many companies, however, would rather avoid the spotlight of trading on the stock market. Founded in 1992, InfoImage Inc. in Phoenix, with estimated revenue of $30 million, delayed going public for years. After long success as a service provider, though, the company now feels that it has a strong position in the portal market and wants to capitalize on it, so it will announce this week that it plans to pursue an IPO.

InfoImage CEO Randy Eckel said he delayed going public to focus on developing a corporate Web portal software product, Freedom, instead of putting undue focus on meeting earnings expectations.

"I'm one of those people that thinks a company should go public only when it's ready," said Eckel. "I was nervous about being a public company in an early-adopter market. As a company, you need to be nimble, and that's harder as a public company."

Even as a private firm, however, InfoImage began offering options to employees in 1996. It has also increased its development staff from 12 to 70 in the past 24 months.

The negative side of going public, said Schiff, is managing quarterly expectations.

"Meeting expectations can be a headache," he said. "The last thing you want is an irate stockholder with 100 shares bothering you about executive decisions."