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    GLOBE 100
    Firms find fickle market after going public

    Unlike mid-1990's, only 18 Boston-area companies took the IPO plunge in 1998

    By Ronald Rosenberg, Globe Staff, 05/18/99

    nlike the glory years of the mid-1990s, when scores of Massachusetts' emerging companies headed to Wall Street to test their value as publicly traded companies, only 18 Boston-area companies took the IPO plunge in 1998 - the same number as in 1997.

    Those that took the initial public offering route found a fickle stock market, one that prizes Internet software companies but looks askance at small local banks, even though they raised the most money in their offerings.

    And some companies that don't fit either category but have proven financial track records - such as retailer Tweeter Home Entertainment Group Inc. and Mercury Computer Systems Inc., a provider of digital signal processing systems to the military and medical communities - have experienced significant jumps in their stock.

    Noticeably absent from the 1998 IPO list are companies in the telecommunications and biotechnology sectors, which raised hefty sums on Wall Street in years past. Instead, young telecom companies are being acquired by large corporations, and biotechnology companies are remaining private with research and development funding from powerful pharmaceutical partners.

    Gone also is the rush of software companies that dominated the 52 IPOs in the 1996 Globe 100.

    Not only have there been fewer companies since then, but those that debuted on Wall Street have raised fewer dollars. Last year, 18 Bay State companies raised nearly $1.17 billion, down sharply from 1997 when another 18 companies garnered $1.9 billion. In 1998, five banks raised more than $80 million each in their initial public offerings, led by Mystic Financial Inc., the holding company for Medford Co-operative Bank, which raised $217 million.

    A closer look at last year's IPO graduates shows that 12 of the 18 companies posted stock price gains, including three of the five banks, although many of those gainers have seen their prices fall since.

    One noticeable example is the Globe 100's top IPO performer, International Integration Inc., a six-year-old provider of fixed-price information technology consulting and electronic-commerce services for large corporations. Based in Cambridge, the 283-employee company consistently was profitable before launching its IPO in June at $12 a share. The stock climbed, hitting its all-time high of 32 on March 31, 1999 - making it the top performer in the Globe 100 survey with a 166.67 percent stock gain. But since then, the stock has dropped precipitously to under 18 a share, despite the company reporting a 56 percent jump in first-quarter profits on a 45 percent increase in revenues.

    ''I wish I knew the reason why the stock is down, given that we exceeded Wall Street analysts' expectations,'' said Michael Pehl, International Integration's chairman and chief executive.

    However, number two on the IPO list, Exchange Applications Inc. of Boston, a developer of database software for corporate customers, has seen its stock more than double - and continue to climb in recent weeks - since going public in December. The nearly five-year-old company has developed software, called Valex, that helps companies such as Bell Atlantic and Citigroup Inc. analyze data and customer patterns.

    Wall Street has also looked favorably on some traditional companies, such as Tweeter Home Entertainment, the audio and video consumer electronics retailer and perhaps the best-known company on the list. Woburn-based Tweeter has seen its stock rise from an IPO price of $17 last summer to 32 at the end of March. Raising $46 million, Tweeter used some of the proceeds to acquire Home Entertainment of Texas, which operates seven stores in Houston and Dallas.

    At the bottom of the list is Giga Information Group Inc., a Cambridge-based provider of technology and management advice over the Internet. Giga was founded by Gideon I. Gartner, who was looking to repeat his earlier success known as the Gartner Group, the Stamford, Conn., high-technology market research firm. But Giga, which claims to provide services to 930 organizations and more than 14,000 individuals, has seen its stock tumble from an initial public offering price of $12.50 last summer to less than 4 a share in eight months.

    In January, Gartner announced he was cutting back his involvement with Giga Information to spend more time on ''other personal interests.''

    By contrast, Paul M. Verrochi, another well-known entrepreneur, is enjoying new-found success with Provant Inc., a Boston-based provider of training and development services for large corporations. Like his previous venture American Medical Response Inc., which acquired a nationwide network of family-owned ambulance companies before being acquired by Laidlaw & Co., Provant is buying smaller companies such as Project Management Services Inc., an Atlanta-based developer of training programs for project managers.

    Verrochi's new company raised $33.8 million nearly 13 months ago, and the stock has climbed more than 37.5 percent since.

    This story ran on page D26 of the Boston Globe on 05/18/99.
    © Copyright 1999 Globe Newspaper Company.

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