Ingres, open-source database firm, lining up ducks for possible 2008 IPO

As Ingres Corp. tries to position itself for an IPO next year, the open-source database software provider has been doing all the things investors like to see.

The company has put in place an executive team that knows its way around Wall Street and is billing new customer accounts on a subscription model that provides a more predictable revenue stream.

Ingres has posted two cash-flow positive quarters this year, CEO Roger Burkhardt told me, and is predicting it will be cash-flow positive every quarter next year and earning a profit, less stock option costs, by the end of 2008.

Burkhardt says that 35% top-line growth is "a reasonable growth rate for the next three-to-five years."

Yet if and when it gets out the door, its valuation may depend for the most part on an event outside its control -- the highly anticipated public market debut of NetSuite. That software-as-a-service provider, which filed to go public months ago and is still in the pipeline,  will provide a fresh reading of how Wall Street values SaaS companies.

"If you talk to investment bankers, they put us in with the same comparables group, with Salesforce.com or NetSuite," Burkhardt says. 

The pitch books that banking firms have shown Ingres have a valuation range "between three and eight times (annual) revenue," Burkhardt says. "Three to five would be a nice range."

If the public markets suffer a severe down draft next year, though, that valuation range -- if not the offering itself -- could be a tough sell. Ingres also has to find a way to not get stepped on by its mammoth-sized database rivals.

The company has no illusions about becoming a top player in a market dominated by Oracle, which had 44% of database software sales in 2006, according to IDC. Second was IBM at 21% and Microsoft was third at 18.5%. Ingres was not in the top five. The market grew 14% to $16.5 billion last year.

Ingres orders rose 70% annually for the year ending in June and the company expects to double revenue this year. While Burkhardt declined to share a revenue number, a person familiar with Ingres' operations told me it will achieve a $100 million annual sales run rate by the end of next year.

Rather than try to convince big companies to replace the top players in the heart of their data centers, Ingres is picking off new application deployments within those enterprises. It recently partnered with Business Objects and others to offer a broader range of products and has made three acquisitions to boost its service arm.

Ingres, which has been around more than 20 years and ended up as part of Computer Associates, got new life in 2005 when it was bought by the venture buyout firm Garnett & Helfrich Capital. The deal left CA with a minority stake and gave Ingres access to a large base of Fortune 500 customers.

Since then, Ingres has worked to place itself at the intersection of two tech trends that have proven popular with customers and investors: open-source and SaaS. Like Linux provider Red Hat, the company makes its money from service and support, rather than selling shrink-wrapped software. To alleviate customer's intellectual property concerns, however, it offers licenses with full IP indemnity.

"We provide very similar wording to what you would get with a traditional software license," says Burkhardt, a former head of technology at the New York Stock Exchange who joined Ingres in July, 2006, and became CEO this past August.  

Tom Berquist, a former Citigroup managing director, is CFO. The company, which employs 350, poached VP of sales Steve Shine out of Sybase earlier this year and next week plans to announce that it's also hired another Sybase veteran, Ketan Karia, to head marketing along with Tracy Eiler, formerly of Postini.

Jeffrey Saper, vice-chairman of the powerhouse Silicon Valley law firm Wilson Sonsini -- which is working on the NetSuite IPO -- is now outside counsel to the Ingres board. 

It's nice to have those pre-IPO options to hand around. 

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