IntraLinks Finally Gets the IPO Prize

Since 2000 IntraLinks (IL), which provides business services software, has made three attempts to launch a public offering. The technology company finally got lucky this week, however, as it priced 11 million shares at $13 each -- although the price was well below the expected $14 to $16 range.

Timing is often difficult for IPOs. After all, the market can go from hot to cold quickly. IntraLinks' earlier attempts were particularly ill-timed, the first coming just as the technology bubble burst and then a few years later during a market lull. The most recent plan was filed just before the market pullback this spring.

A Provider of Web-Based Tools for Financiers

Founded in 1996, the vision of New York-based IntraLinks was to provide web-based tools that allowed financiers to manage their transactions. The initial focus was on debt syndication deals, which turned out to be a lucrative business. However, in light of the market dynamics, there were only a handful of customers.

To broaden things out, IntraLinks expanded its platform into new categories. For example, it moved into mergers and acquisitions (M&A) due diligence, clinical trials management, board reporting and contract/vendor management.

It certainly helps that IntraLinks has a powerful system. It is easy to install and adopt within any organization. Moreover, the system is secure, compliant and auditable.

The Challenges

Currently, the company has over 4,300 customers across 25 industry segments. In fact, Gartner research says that IntraLinks represents about 22.5% of the worldwide market.

But this is a problem: The addressable market size is relatively small. Keep in mind that IntraLinks' revenues came to $140.7 million last year. Besides, companies may rely on existing information technology or old approaches (like the phone, fax and email).

And despite its revenue growth -- which came to 25% in the past six months -- and market dominance, IntraLinks is still a money loser. The company's net loss was $9.4 million in the past six months. Although, this is down from the $17.2 million year-ago loss.

Another concern for investors is the $291.8 million debt load. True, this is from TA Associates buyout of IntraLinks in 2007, and no doubt, the IPO will pare down the amount. Yet, there will still be large ongoing interest costs, which could weigh on results.

But ultimately to continue growth for the long-term, IntraLinks needs to break out of its financial services niche. While the company's technology is solid, it will take time to make this transition. Also, the competitive environment will certainly be fierce, with rivals like Microsoft (MSFT), EMC (EMC) and IBM (IBM).

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