Yes, that is a headline from 2013, not 1999.  Those of you old enough to remember 1999 remember that name.  Covisint was the marketplace set up by the Big Three automakers at the height of the Commerce One and Ariba battles. (C1 ended up giving up stock to the Big Three and winning the deal while Ariba refused to provide equity.  At least that is the lore among Aribians!)

That could be the last you heard about Covisint.  I have followed Covisint from afar since it split itself in two in 2004–selling the reverse auction part of the business to FreeMarkets (which then sold itself to Ariba) and eventually selling the messaging business to Compuware.  The messaging business had been established in the automotive industry and the goal was to expand beyond autos into healthcare.

The idea of going from vertical into another–even though they are both heavily EDI-based –seemed daunting so I stayed away, but the prospectus for the offering this week shows some progress in diversification has been made in the intervening 7 years.

Key items from the prospectus include:

  • The company generated a little more than $90 million in revenue for the year ended March 2013.  Revenues have almost doubled in the last three years.
  • For that same period, 56% of the revenue was from the automotive industry, with 33% of the total revenue coming from GM.
  • For the year ended March 2013, 31% of the revenue came from the healthcare industry.
  • The company has yet to make a profit on a GAAP basis and shows small non-GAAP EBITDA losses. (No surprise there.)
  • Perhaps most intriguing, about 37% of revenues are from implementation and onboarding services.  So while it is marketed as a Platform-as-a-service (PaaS) business, it does not look like a pure software play.

The prospectus raises a whole bunch of interesting questions:

  • Is there something exciting here, or is Compuware just smartly taking advantage of the great valuations that ICs are enjoying in the market?  Will this be valued more like SPSC or GXS/Sterling? How does the eventual valuation relate to Compuware’s valuation? (There is a complicated story around Compuware stock right now as well.)
  • Healthcare related deals tend to make my eyes glaze over, but we are constantly reminded that healthcare is 16% of the GDP and Covisint’s products sound like they might relate to the healthcare exchanges being set up. Are they onto something in healthcare that is sustainable or is it just buzz?
  • Have they really made any progress in oil and gas?  This is an enormous opportunity that is left relatively untouched by the last 10 years in terms of industry consolidation.

Sorry for the cursory analysis, but it is going to take some time to read through the prospectus and begin to determine what is real and what is not.  In any case, I suspect there are many more examples of companies we have not heard about for years that are going public or thinking of doing so. In fact, there’s another one on the list of filings, Premier, that I’ll write about next.

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