It seems that SoundBite Communications (Nasdaq: SDBT ) is cursed. The company delayed its IPO in mid-October because it received a letter from Universal Recovery Systems about alleged patent infringement. Then, last week, SoundBite slashed its offering from 6 million shares to 5.2 million and priced the deal at $8, which was below its initial $12-$14 range. It certainly didn't help that the IPO came out a day after Thursday's plunge in the Dow.
But SoundBite has a sound business. The company delivers on-demand software for so-called automated voice messaging (AVM) services. This allows companies to send large volumes of recorded messages to customers, for purposes including collections, customer care, and marketing pitches.
Because it's on-demand, SoundBite's technology does not require hardware investments or high-priced consultants. It usually only takes a few days to implement the system.
So far, SoundBite has been growing at a healthy clip. For the first half of this year, revenue is up 49% to $18 million. The company even posted net income of $428,000 in Q3. There are more than 200 customers, including big names like AT&T (NYSE: T ) .
Of course, SoundBite does face competition -- for example, from Avaya. But keep in mind that many of its rivals have traditional software solutions. In fact, SoundBite's on-demand rivals are fairly small at this point.
Interestingly enough, SoundBite is selling at a discounted valuation compared to some of its peers that have recently gone public. The company currently trades at about 2.4 times revenue, which compares with multiples of 7 to 17 for companies like Salary.com (Nasdaq: SLRY ) , athenahealth (Nasdaq: ATHN ) , and Constant Contact (Nasdaq: CTCT ) .
What about the legal problems? Such things are normal in the tech world, especially in fast-growing sectors. Consider that ShoreTel (Nasdaq: SHOR ) received several patent claims before its IPO. But it looks like investors are shrugging it off.
This is not to imply that there is no risk. A legal fight is not cheap -- and it's distracting. But SoundBite is selling at a fair valuation in light of its growth rate, and it has a strong product offering. So for Foolish investors searching for an IPO, this one is certainly worth a look.
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