Newport-Based Quest Software Plans IPO, Hopes for $60 Million
Quest Software Inc., a profitable Newport Beach firm that develops e-commerce and computer database software, hopes to raise $60 million in an initial public stock offering.
The company did not disclose how many shares it plans to sell, nor at what price. Quest said in a Securities and Exchange Commission filing that it plans to use about $10 million of the offering’s proceeds to repurchase all 1.78 million of its Series B shares, which it sold to UBS Capital LLC in April for $10.02 million.
Quest also said it will use another $10 million to repay debt; the remainder will go for general corporate purposes. Neither company officials nor the investment bankers underwriting the deal would discuss the offering, including the reasons for Quest’s repurchase of the B shares.
All shares to be offered are being sold by Quest. None of the company’s current investors, including Chairman Vincent C. Smith, who controls 54.1% of the company, are selling shares. Quest has a total of 44.5 million shares outstanding--both Class A and Class B.
The company, which incorporated in California in 1987, started as a developer of software for a proprietary operating system used by a line of Hewlett-Packard Co. machines.
In 1995, Smith joined the company as a director and spearheaded Quest’s shift to making software tools for open-system technologies, a much broader market.
These tools range from software that allows developers to back up a database and make it work more efficiently to information management programs that can index and archive data and send it over the Internet.
The company, which generally has enjoyed steady financial growth since 1994, made $2.3 million on revenue of $34.8 million last year. For the first three months of 1999, the firm earned $883,000 on revenue of $12.8 million.
Smith, 35, became chief executive in 1997 and board chairman last year.
Today, Quest Software draws its customers from a broad spectrum of industries--from energy and manufacturing firms to financial services and telecommunication companies. Industry experts said its users are predominantly computer software developers working on large databases, not the average consumer.
Though many of Quest’s products support Oracle Corp.’s tools, the SEC filing notes that Quest also faces competition from Oracle, the database giant headquartered in Redwood City.
Significant competitors also include Actuate Software Corp., Computer Associates International Inc., Mobius Management Systems Inc. and IBM Corp., the company said.
Quest, which had about 307 employees as of March 31, bases most of its staff in Orange County and Australia, according to the filing. The company said it plans to relocate its corporate headquarters to Irvine, but it did not disclose when it expects to make the move.
Analysts said that Quest’s offering is a large one for a company its size, but it still falls a bit short of the amount pulled in by other Orange County Internet firms that have gone public this year.
In March, for example, Autobytel.com, the Irvine online car-selling service, capitalized on consumers’ growing acceptance of e-commerce and raised $103.5 million.
Tickets.com Inc., a Newport Beach online ticket broker, said this month it will try to raise $75 million in an IPO later in the year.
BancBoston Robertson Stephens will be the lead underwriters of the Quest offering, with Donaldson, Lufkin & Jenrette Securities Corp., CIBC World Markets Corp. and FAC/Equities, a division of First Albany Corp. also managing the offering.
