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Brightcove files for IPO, though chips are down

By D.C. Denison
Globe Staff / August 25, 2011

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Brightcove Inc., a Cambridge company that sells online video tools and hosting, filed for an initial public offering yesterday in an effort to raise as much as $50 million from investors in a market that may have cooled to companies seeking to sell shares for the first time.

The company has not set a target date for its IPO or a price range for its shares, but it is filing when many firms have postponed such offerings because of the stock market’s recent dramatic swings. Brightcove said it will apply for a listing on the Nasdaq Global Market under the symbol BCOV.

Brightcove did not comment on its filing yesterday. US securities law severely restricts the information companies can release during the mandated “quiet period’’ after registering for an IPO.

But in its filing, Brightcove said that it is not yet profitable. It lost $17.8 million in 2010 and $9.7 million for the six-month period ended June 30. The company said the losses, which it expects to continue at least through 2012, are attributable to the expenses involved in building its products and services, expanding its business, and acquiring customers.

Revenue for 2010 was $43.7 million. For the six-month period ended June 30, Brightcove said its revenue was $28.4 million, up from $20.3 million for the comparable period in the previous year.

During one week earlier this month, when stocks were sinking, 10 companies decided to put off their IPOs until the markets quieted down. Boston-based online storage provider Carbonite Inc. has been one of the few companies recently to buck that trend, but it had to reduce its original asking price of $15 to $17 per share down to $10.

“It will be interesting to see the market’s reaction to an unprofitable technology company like Brightcove,’’ said Anand Sanwal, cofounder of CB Insights, a New York information services firm.

“The company has some big media brands as customers and so has seen success in that regard,’’ he said. “However, given the competitiveness of the video space, the speed at which the space is moving, and the company’s expected lack of profitability through 2012, it will be interesting to see what investor appetite is, especially if the market remains volatile.’’

Founded in 2004, Brightcove anticipated the growth of video on the Internet and has targeted its services, which include editing software and the hosting of online videos, to companies that are interested in adding video to their websites. Because creating and hosting online videos demands specialized technical expertise and the ability to store and serve large video files, many companies prefer to pay a company like Brightcove rather than host video on their own servers.

Brightcove has a number of media customers, including The New York Times Co., The Boston Globe, The Weather Channel, and Condé Nast. The Times Co., which owns the Globe and Boston.com, also holds a small stake in Brightcove. The company’s customer list also includes many nonmedia firms that use videos on their websites. Macy’s, General Motors, and Staples use Brightcove’s services to post marketing and informational videos on their sites.

“Brightcove is a major player in online video services,’’ said James L. McQuivey, an analyst at Forrester Research in Cambridge. “There are only two other players who matter, and the sector is growing so fast that there is plenty of room for all three.’’

According to McQuivey, Brightcove’s two major competitors are Ooyala Inc., based in Mountain View, Calif., and the Platform for Media Inc., in Seattle, which Comcast Corp. bought in 2006.

According to a recent study by Cisco Systems Inc., Internet video is expected to make up 40 percent of all consumer Internet traffic worldwide in 2011 and is projected to expand to 62 percent of all consumer Internet traffic by 2015.

In May, Brightcove announced the release of App Cloud, a software application development and management platform designed to help customers publish and distribute video on multiple Internet-connected devices, such as Apple iPads and Android smartphones.

While it is not making money, Brightcove is growing. Last month, the 280-employee firm said that it plans to relocate from Cambridge to a tower on the Boston waterfront, where it expects to hire 120 workers to fill out its new space.

D.C. Denison can be reached at denison@globe.com.