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UPDATE: Workday Expects 22.75-Million-Share IPO to Top $500 Million

Date : 10/02/2012 @ 1:50AM
Source : Dow Jones News
Stock : Facebook - Class A (MM) (FB)
Quote : 77.62  0.0 (0.00%) @ 4:14PM
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UPDATE: Workday Expects 22.75-Million-Share IPO to Top $500 Million

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--Workday files terms for its IPO, which could raise as much as $589 million

--Company's shares are scheduled to start trading Oct. 12

--Workday will join recently hot series of IPOs tied to "cloud"-based computing

(Updates throughout with context.)

   By Chris Dieterich and Saabira Chaudhuri 
 

NEW YORK--Enterprise-software company Workday Inc. has plans to launch the biggest technology initial public offering since the debut of Facebook Inc. (FB).

Workday aims to sell 22.75 million Class A shares in its IPO, expected to price at between $21 and $24 each, according to a Monday filing with the Securities and Exchange Commission. The IPO could raise as much as $589 million, including an overallotment option, which would make Workday the largest tech offering since Facebook's $16 billion May IPO, according to Dealogic. Workday's market valuation would be $3.6 billion if it priced at the midpoint of its expected range.

The focus of Workday, based in Pleasanton, Calif., is human-resources software, and it competes directly with the likes of Oracle Corp.'s (ORCL) PeopleSoft and German software company SAP AG (SAP, SAP.XE).

"It's certainly one of the most widely anticipated 'cloud' services," said Scott Sweet, senior managing partner at IPO Boutique.

"Cloud computing" is a catch-all term that refers broadly to making use of the Internet to store and process data remotely. Workday derives a majority of its subscription revenue from its program that provides cloud-based software for payrolls, financial management, time tracking and employee expense management.

Workday was co-founded by David Duffield and Aneel Bhusri, who ran PeopleSoft before Oracle's takeover of the company was completed in 2005.

The two-class share structure--which grants class-B shareholders the right to 10 votes, compared with one for each class-A share--will allow Mr. Duffield and Mr. Bhusri, with their affiliates, to retain approximately 67% voting power after the offering, according to the filing.

The company said in its filing that it will list on the New York Stock Exchange under the symbol WDAY. Shares are expected to begin trading on Oct. 12, according to market-intelligence firm Ipreo.

Workday is the latest and biggest offering from the cloud-technology niche.

Three third-quarter "cloud" deals have notched post-IPO gains. Friday, network-security provider Qualys Inc. (QLYS) climbed 18% in its public debut, extending early gains Monday with a rise of 1.6% to $14.38. Palo Alto Networks Inc. (PANW), which also provides network security, has climbed nearly 50% since its July IPO. Eloqua Inc. (ELOQ), which uses the cloud for marketing data, is up 75% since its early-August IPO.

Workday's offering aims to be larger than these three combined.

Revenue more than doubled to $119 million in the six months ended July 31. But the company has never turned a profit amid rising costs for research and development, sales and marketing.

"This is in the Palo Alto Networks arena--very high demand, long-awaited," IPO Boutique's Mr. Sweet said. "They have exponential top-line numbers, their growth is just off the charts--but they are losing a lot of money, mainly due to [research and development]. But you're going to see that in many IPOs."

In late June, Workday filed papers confidentially with the SEC, using a new rule that allows companies to keep paperwork out of view until 21 days before the company launches its "road show" to market its IPO. In late August, investors got their first look at Workday's plans when the company filed to raise as much as $400 million for working capital and other general corporate purposes, less than the amount stated in Monday's filing.

Morgan Stanley (MS), Goldman Sachs Group Inc. (GS), Allen & Co. and J.P. Morgan Chase & Co. (JPM) will serve as lead underwriters.

Write to Chris Dieterich at christopher.dieterich@dowjones.com and Saabira Chaudhuri at saabira.chaudhuri@dowjones.com

Subscribe to WSJ: http://online.wsj.com?mod=djnwires




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