Dot-Coms Tout Progress, With Little Fanfare
By JENNIFER BELLANTONIO
Some of Orange County’s dot-coms say they are making progress turning themselves around. But don’t worry if you haven’t heard about it.
The companies, which have slashed spending and refocused their businesses, saw their every move noted during the dot-spiral days. Now they find themselves persona non-grata as some quietly gain ground.
Two weeks ago, Costa Mesa-based Tickets.com Inc., which runs call centers and sells tickets online and related software, raised $20 million from existing investor General Atlantic Partners LLC. While dot-com financings once made big news, Tickets.com’s got just a brief in one of OC’s daily papers.
Aliso Viejo-based buy.com Inc. cut its operating loss last year to $20 million, down from $100 million the year earlier. But Robert Price, the online retailer’s president, said most of his company’s coverage last year was “more interested in reporting the bad news about buy.com and taking the negative spin on the restructuring.”
“Few people have given us any credit,” Price said. “Few companies I know make an $80 million improvement in a short period of time.”
Eric Bauer, chief financial officer at Tickets.com, said his company still struggles on Wall Street, despite some gains. As of last week, Tickets.com was trading at about 3, down from a 52-week high of near 5.
“I think people continue to say this is a small company going up against a Goliath named Ticketmaster,” Bauer said.
Tickets.com and others still have work ahead of them. The big challenge for many is turning a profit. Tickets.com expects to post a profit sometime this year, according to Bauer.
“Until you reach a point of profitability, people view you as running under the radar screen and say, ‘Once you’re profitable we’ll take a look at you again,'” Bauer said.
Tickets.com hasn’t seen a big financial change. The company’s sales dropped 36% to $9.7 million in the fourth quarter. Its operating loss fell 25%, going from $14 million in the year-ago period to $10.5 million.
Buy.com, which was bought back by founder Scott Blum last year and taken private, made a “small profit” on operations in December, according to Price. But he said the company, which expects to be profitable for all of 2002, may not be “profitable every month or even every quarter.”
“We need a little more volume on the revenue side to get where we want to go,” he said.
The company has been kept afloat financially by Blum, who recently announced plans to relocate his family to Jackson, Wyo. The move isn’t expected to impact buy.com, which may ask Blum for more cash from time to time, according to Price.
“I don’t think writing checks depends on where you live,” he said.
Irvine-based Autobytel Inc., an online automotive referral service, turned an operating profit in the fourth quarter. Chief Executive Jeffrey Schwartz said the “driving factor” was the company’s buy last year of Autoweb.com Inc., a Santa Clara-based rival.
The acquisition allowed the companies to save about 40% on operations, including a reduction in workers from about 420 to 270.
“That reduction in overhead really created the event that brought us to profitability and presumably will sustain us,” Schwartz said.
Wall Street has taken some notice: Autobytel’s shares were at 3.75 last week, nearly double where they were at the start of the year, though nothing like the 40 level of 1999.
“I don’t really focus on the degree of recognition,” Schwartz said. “Our job here is to build a great company.”
Aliso Viejo-based WhyRunOut.com Inc., an online delivery service for groceries, movies and other items, quietly turned its first profit in the fourth quarter, around the same time Albertson’s Inc. made a splash with plans for home delivery in OC and elsewhere in the Southland.
“For the past couple of years, firms in our business were being recognized and covered by the media based on how much venture capital they raised, rather than on whether they were building successful businesses,” said Dan Frahm, WhyRun-Out’s founder. “Since we never raised much capital relative to the $800 million raised by Webvan, we got a lot less coverage.”
WhyRunOut, which last year bought Camarillo-based online grocer PDQuick Inc., formerly known as Pink Dot, is looking to raise $5 million to $10 million in extra funding, Frahm said. He called it the first large chunk of financing the company has gone after.
WhyRunOut is looking to expand to other suburban areas and extend the Pink Dot name to other cities, including Seattle, San Francisco, Phoenix and Las Vegas, Frahm said.
“(Webvan and HomeGrocer) may have failed to execute in a cost-effective way, but the market they tried to reach is still there,” he said.
Despite the finicky media coverage, online companies say things are turning for them.
“A lot of the evangelical work is behind us,” Autobytel’s Schwartz said. “We’ve become a pretty institutional part of how dealers sell cars.”
At buy.com, vendors, advertisers, distributor partners and customers that had turned their back on the company during its darkest hour now are coming around, according to Price.
“Just now are we starting to get some of the recognition from people that, ‘Hey, buy.com is here to stay,'” Price said. “I think that’s why we’re getting some traction on the top line.”
Tickets.com points to its recent funding as a reflection of its progress, according to Bauer.
“It gives us ammunition to go out and compete aggressively,” he said. “It assures everybody that this is a company that’s here to stay.”
Last year, Bauer said the company renegotiated rates on telecommunications service and credit card processing, and upgraded its technology and services. It also has added some new sports teams to its rooster, such as the Chicago White Sox.
“As we look at that, we say that’s a real validation of what we’re about,” he said.
He added that Tickets.com “continues to defy the odds in an environment that no one thinks is possible.”
“Calling me a dot-com is a bit of a misnomer,” Bauer said. “But that’s okay. I’m not going to sit and spend all my time trying to convince people otherwise. The name is the name. In time, it’s going to become a badge of honor.”
