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Online Computer Bookstore Hopes to Raise $21M in IPO
Jim Milliot -- 9/14/98
Computer Literacy, an online retailer that specializes in the sale of technical information, hopes to raise $21.5 million through an initial public offering of three million shares, according to its prospectus filed with the Securities and Exchange Commission. The company said it intends to use the proceeds for expanding its direct sales, telesales and marketing operations as well as for greater development of its internal systems and infrastructure. Any remaining funds will be used to provide working capital and for general corporate purposes.
For the fiscal year ended January 31, 1998, Computer Literacy had total revenues of $10.9 million and a net loss of $3.2 million. Its revenues in fiscal 1998 included $7.9 million derived from the four retail stores the company acquired in May 1997 for $5.1 million. Online sales in the year rose to $3 million from $180,000 in the prior year. Computer Literacy finished fiscal 1998 with 19,979 online customers, compared to 1614 at the end of fiscal 1997, and had 44,000 customers as of July 31, 1998.

For the first half of fiscal 1999, ended July 31, 1998, Computer Literacy reported sales of $9.2 million, up from $2.9 million in the first six months of fiscal 1998. Online sales rose to $4.2 million from $620,000, while retail sales increased to $4.9 million from $2.2 million. The net loss in the period was $3.6 million, up from $986,000 the prior year. From its inception through July 31, Computer Literacy had an accumulated deficit of $7.4 million, and the company said it expects to incur substantial losses for the foreseeable future.

Although book sales represented 90% of its total sales for the first six months of fiscal 1999, Computer Literacy has recently added training materials, product manuals and research reports to complement its book offerings and broaden its business. With the additional material, the company is now offering more than 300,000 titles.

In addition, Computer Literacy is looking to grow through an increase in corporate accounts; the company currently has relationships with such companies as Microsoft, Lotus, Intel and Sun Microsystems. It is also planning to expand its presence in the international market, which accounted for 21% of sales last year.

The company also hopes to heighten its brand recognition through increased sales and marketing efforts. In the first half of fiscal 1999, Computer Literacy spent $4 million on sales and marketing, compared to $4.2 million for all of fiscal 1998. Not likely to see new investment, however, are the company's four bookstores.

The prospectus also noted that while Computer Literacy currently has a warehouse and distribution center near its headquarters in Sunnyvale, Calif., it is considering outsourcing those functions to a company closer to certain publishers, wholesalers and distributors. In fiscal 1998, Ingram accounted for 30% of Computer Literacy's book purchases, a figure that rose to 36% at the end of the first half of the current year.
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