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November 14, 2006

Salary.com IPO? Dot com Bust 2.0?

posted by MR WAVETHEORY at 11/14/2006 06:20:00 AM
The only thought that crossed my mind when I read that Salary.com Inc. (Nasdaq SLRY) is going public is this: are we getting ready for a dot com bust 2.0 or what? This company did about $5 million in revenues in the 3 months ended June 30 2006 vs $3 million last year. That's great growth, but how large exactly is this market? Judging from the prospectus, Salary.com seems to be trying really hard to make it seem really large.
In today’s service-based economy, the attraction, motivation and retention of employees is a leading strategic priority for most companies. Moreover, compensation ranks as one of the largest expense categories for most employers. According to the U.S. Bureau of Labor Statistics, employee compensation in the United States totaled approximately $5.4 trillion in 2005. Employers who underpay their employees risk high turnover, while employers who overpay their employees risk impairing their profitability. Accordingly, compensation management is critical to organizations of all sizes.

But come one. Salary information is hardly even close to a $5.4 trillion market. The IPO isn't large, but for a company doing $5 million a quarter to raise $50 million?

Salary.com Inc., which provides on-demand compensation management products, said on Monday it is planning an initial public offering of as much as $50 million worth of common stock.

The underwriters are a motley crew.

Thomas Weisel Partners LLC, William Blair & Company, Needham & Company LLC, Wachovia Securities and Pacific Crest Securities will underwrite the proposed IPO, according to an amended offering document filed with the U.S. Securities and Exchange Commission.

If you don't believe me, check it out. (Salary.com Prospectus)

Am I missing something here?

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