Can Gomez break Mass. IPO drought?
Lexington tech company wants to raise $80.5m, but no date has been set
Lexington technology company Gomez Inc., trying to break the initial public offerings drought in Massachusetts this year, has registered for an IPO that will seek to raise $80.5 million.
Gomez, which started as an Internet research firm during the dot-com era, shifted its business to what it now calls "web experience management." Put simply, it helps large and small companies test the quality of their websites and related applications to assure they provide a fast, dependable, and consistent experience for users.
In its filing with the Securities and Exchange Commission, Gomez became the fifth Bay State company to notify regulators over the past six months of intentions to go public. Thus far, however, there have been no IPOs of state companies this year as a slowing economy and volatile financial markets have made stock sales riskier.
Gomez, which plans to go public on the Nasdaq exchange under the ticker symbol GOMZ, employs 237 worldwide, including 159 in the United States, most of them in Lexington. Chief executive Jaime W. Ellertson declined to discuss the IPO registration yesterday, as a company spokeswoman cited an SEC-imposed quiet period.
The nine-year-old company sells its services not through a traditional licensing model but through the "on-demand" model pioneered by software-as-a-service market leader Salesforce.com.
Gomez's annual revenue has climbed from $14.8 million in 2005 to $21.7 million in 2006 to $32.6 million in 2007, according to the filing. During the same three-year period, however, its operating income rose from $231,000 in 2005 to $1.3 million in 2006 before tumbling to a loss of almost $1.5 million last year, the filing said. Gomez customers range from Yahoo to Home Depot to JPMorgan Chase, and include companies with 13 of the 20 most visited US websites.
IPO watcher Brian Hamilton, chief executive of research firm Sageworks Inc. in Raleigh, N.C., said many private companies have withdrawn their IPO registrations in recent months. He warned it would be difficult for any company with less than $50 million in annual revenue to have a successful stock offering in the current environment. "To me, this falls into a category of companies that are just going out public too early," Hamilton said. "Gomez is a small company. When you have that small of a revenue base, you just don't have as much weight to the company. So if one component of the business model changes, there's not that much to fall back on. In this market, there's going to be a lot of scrutiny of this kind of company."
Gomez has raised more than $66 million in venture capital from an investment consortium that includes Dolphin Equity Partners, AdAstra, Doughty Hanson & Co., and ABS Ventures. It rolled up a pair of companies in related fields last year, buying Sysformance AG of Switzerland and BrowserCam of San Francisco in a bid to broaden its offerings in Internet performance monitoring and testing.
Two other Massachusetts companies, both in Woburn, have registered for IPOs this year, according to New York research firm Thomson Reuters. LogMeIn Inc. is seeking to raise $86.3 million, while Biotrove Inc. is seeking to raise $75 million. At this time last year, a dozen Massachusetts companies had registered for offerings.
Late in November, Waltham's NameMedia Inc. filed for a $172.5 million IPO, and GlassHouse Technologies Inc. of Framingham filed for a $100 million offering in December. Neither has yet occurred.
Robert Weisman can be reached at weisman@globe.com.
