Altiris Inc., which notched a $50 million IPO on May 22, was the first software-related company to price in 2002. Since its $10 per share offer, its stock, like others in the sector, has taken a dip. As the company exited its quiet period last week, CEO Gregory Butterfield sat down with Private Equity Week to talk about life as a public company, particularly as an IT management company starting out in such an anti-tech atmosphere.
When was the decision made by Altiris to seek a public offering?
We have been actively pursuing this financing event since about Q3 2001. I’ve been with the company two-and- a-half years, and we’ve been functioning as if we were a public company, even though we were privately held. What I mean by that is the level of accountability with regards to reporting and everything else. In fact, in two-and- a-half years we’ve done three private rounds, and we concluded that based on where we were as a company…based on the fact we were doing much larger transactions with larger companies who wanted to get confidence and drill down into the financial stability of the company, that it made sense at this time based on our performance. Even though the market has been hit substantially – Altiris has gone kind of upstream or against the grain – we felt it was in our best interest.
Since you had financing behind you and considering the IPO market over the last year, why did you go public now instead of waiting another 12 months?
We concluded Altiris could not control the overall market and, as you know, the software sector has been under a significant amount of pressure, especially in recent weeks. Based on all our due diligence as well as working with the brightest minds in the industry, trying to conclude and forecast where we thought the market should be… we concluded to move forward just based on our overall performance. We’ve had two years of 200% plus growth and nine sequential quarters of quarter-over-quarter growth and felt it was necessary for the company to go to the next level.
We were the first software company to go out in 2002, and we’re somewhat swimming upstream because many of the software companies have struggled. But it has also worked to, I believe, our advantage given the fact that in poor economic conditions and difficult software sector times Altiris has had record growth. And so we are getting the attention of portfolio managers and bankers and all types of people that otherwise we might not had the market been extremely strong. .
Many companies’ sales in the software sector are flat or down. Altiris has had substantial growth so based on that growth we feel there’s a competitive advantage for us to go out now. And to grow and take market share versus sitting back, waiting for the market and not having those funds, not having that visibility, we felt at some point you need to put the stake in the ground…and start moving forward. It was to our advantage to do this now versus wait for unknowns.
What’s pressuring the stock since as it has lagged under its offer price?
I would say the biggest drag that we’re experiencing now as a company is just based on the fact that we are in a sector where many people are struggling. And as result…there might be some skepticism that a little unknown private company actually has the ability to do a forecast that they’re going to be able to do.
I think Altiris is unique in that we provide solutions that lower the total costs of information technology ownership, and so when multiple software companies are struggling because their revenues are based on new projects, what we’re finding is monies spent in poor economies are…spent to make existing technologies work. That’s what Altiris does. We reduce or lower the total costs of IT ownership so we provide a value proposition that is good in any economy.
What was the market doing in May that encouraged your underwriters to say, ‘This is the right time to price’?
The goal was to take the company out before the Q2 timeframe. Before we actually filed there was actually one large financial institution that downgraded the overall sector, software specifically, and since that timeframe it has come off a little bit. We set a range that we felt was a fair valuation for the company and there was significant demand. We were well oversubscribed, and it was in the range we were looking to attract so that’s why we went out.
You priced at the bottom of the range. Do you think the timing was appropriate considering that price?
I wish we had a crystal ball and we could say, you know if we had waited three months or five months it would have been better’. Reality is we felt we got a fair valuation for the company, the cash is on the balance sheet, and we believe that we can’t control the market but we’ll continue to perform. Hopefully as we perform, the stock will follow our performance.
Contact Colleen O’Connor