Loudcloud: Coming Out With a Whimper

Loudcloud tested the initial public offering waters and they are . . . tepid.

Loudcloud tested the initial public offering waters and they are . . . tepid.

After repricing twice and delaying for 24 hours, stock of the managed service provider gained only 6 percent on its debut Friday, March 9, and then quickly settled back to slightly above $6 per share — its original asking price. The 25-million-share offering raised $150 million.

Loudcloud, headed by browser wunderkind Marc Andreessen, had hoped for a market value of $1.3 billion, according to a filing with securities regulators last October.

The tepid initial public offering (IPO) casts doubt on managed service providers that will soon need money, industry executives said. "If they go out at $6 [per share] and hit $3 in a week, the capital markets will scrutinize other MSPs in the space more than they already have," said Paul Santinelli, president and chief executive of NOCpulse, an MSP turned software vendor.

Loudcloud, founded as Vcellar in 1999, provides Web site and back-office operations outsourcing to business customers. The business model is built on the assumption that stand-alone data centers wont be able to address the needs of business customers seeking to buy their services à la carte, rather than as a combo meal.

Suspense surrounded the IPO from the outset, as Loudcloud postponed pricing and trading by 24 hours, moving its Nasdaq debut from Thursday to Friday. The company blamed the change in plan on a snow storm on the East Coast, which delayed a number of last-minute meetings.

Loudclouds lukewarm performance did little to raise confidence in the overall tech sector, which watched the IPO closely for signs of a Wall Street turnaround. To some it was just more of the same.

"Its a different market," said Richard Dym, vice president of marketing at a competing MSP, SiteSmith. "Companies have to be going out on their earnings, not on a dream."