Business Transactions: Intranet Solutions

Intranet Solutions, Inc.
8091 Wallace Road
Eden Prairie, MN 55344

Business Description
IntraNet Solutions, Inc. offers Web content management solutions for intranet, extranet, and Internet applications. IntraNet Solutions; Xpedio™ Content Management System is the industry's first single source, end-to-end content management solution that delivers quick deployment and fast return on investment. The system features advanced HTML/XML content publishing tools and secure back-end content management services including profiling and e-commerce that enables organizations to manage the complete content management lifecycle. IntraNet Solutions' products are installed in over 800 customer sites and are used by some of the world's largest organizations such as Agilent Technologies, British Aerospace Airbus, Ltd., Cargill Incorporated, Ericsson TelecomAB, GE Capital Corporation, and Network Solutions. IntraNet Solutions has offices throughout the U.S. and a European operations office in London.

New Products
IntraNet Solutions' aggressive product rollouts included several strategic product introductions in the last year, including:

• IntraNet Solutions launched Xpedio, the industry's first end-to-end Web content management system, in September 1999. Xpedio is based on core IntraNet Solutions technology, combined with technology obtained from the acquisition of Info Access in September.
  
• XpedioWAM (Web Asset Management) improves the way business can manage and secure Web assets. XpedioWAM works as the single authority that manages the contribution approval process, revision management, archiving, and release and expiration of Web assets.
  
• Platform support for Red Hat Linux was added in January 2000 to broaden the platform's support for Xpedio.

Company History
IntraNet Solutions was incorporated in Minnesota in 1989. In July 1996, the company merged into a publicly traded corporation. At that time, the business included content management software, on-demand publishing and hardware integration services. In 1997 they launched their first Web-based software product. In late 1998 the hardware integration was sold to focus on developing Web-based content management solutions. In September 1999 they acquired Info Access, Inc. and following this acquisition, the company released the Xpedio Content Management Suite. For fiscal year ending March 31, 1998, the stock traded between $3.78 (low) and $8.38 (high); for fiscal year ending March 31, 1999, the stock traded between $2.75 (low) and $8.25 (high). It was not until October through December 1999 that we see a significant increase in share price with a Third Quarter low of $9.06 and a high of $37.38. Through the Fourth Quarter and until the offering, the stock price ranged between $28.75 and $48.13 as of March 9, 2000. The offering went out at $46.00 on March 9, 2000. The company's stock price peaked on March 14, 2000 at $55.40, with a recent low of $17 per share and a closing share price of $20.75 as of June 1, 2000, indicating a market capitalization of $572 million rather than the almost $900 million market capitalization as of the date of the offering: a 36% decline.

The Long and the Short of It For Appraisers
As appraisers, it is our job to evaluate the risk of the company. Ironically, based on themarket's recent performance, it appears that the market is quite fickle on how to evaluate risk, not only in the market place but with specific companies. How could this company change in value over $300 million in three months when nothing really has changed with the operation and outlook of the company and its products? Here is a short list of what appraisers look at when evaluating the specific risk of a company:

• Revenue growth history
  
• Income history
  
• Ability to predict future revenues and net income
  
• Ability of management to execute,manage growth, and develop new products
  
• Ability to protect proprietary technology
  
• Ability to forecast growth of the marketplace for new products and acceptance of those products in the marketplace.

In simple terms, the inability to predict the future with any accuracy creates the majority of the risk that we, as appraisers, take into consideration when valuing companies. If we can predict IntraNet Solutions, Inc.'s revenues and net income with meaningful accuracy, the risk component is easy and the subsequent valuation is well grounded.

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