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GlassHouse Technologies Inc. on Tuesday registered to raise as much as $100 million in an initial public offering that, despite the company's financial losses, could prove a hit with investors drawn to its focus on "virtualization" technology. The Framingham, Mass., company offers consulting services for companies that use virtualization software to improve the performance of corporate servers and cut costs in their data centers. GlassHouse also provides Internet-based data storage. "Software-as-a-service," or SaaS, companies and vendors of virtualization products have proved popular among investors in recent years as corporate customers seek alternatives to conventional packaged software. GlassHouse, with roots in both sectors, will test the strength of that interest, said Peter Falvey, managing director with Boston investment bank Revolution Partners. "It will be a bit of a bell weather," he says. "It's not as though it's the 15th SaaS model to go public in the last year, so it will be interesting to see who the public analysts use for comparables. This one is a bit of a hybrid." Despite GlassHouse's focus on hot technologies, the company continues to bleed cash. In 2006 it reported a net loss of $9.6 million on sales of $37.8 million. GlassHouse also faces formidable competition. It operates in the same sphere as giants such as IBM Corp. of Armonk, N.Y., and local rival EMC Corp. of Hopkinton, Mass., although it doesn't sell software or hardware, as these companies do. GlassHouse has raised $35 million in venture capital since launching in May 2001. The company's largest shareholder is Sigma Partners of Boston, with a 28.1% stake, followed by GrandBanks Capital of Newton, Mass. (13.6%), Kodiak Venture Partners of Waltham, Mass. (11.7%), Paladin Capital Group of Washington (10.1%) and Globespan Capital Partners, also of Boston (5.2%). A successful GlassHouse IPO would represent a boost for Sigma, which in recent months has seen several of its portfolio companies reach or edge toward an exit. In November Dell Inc. purchased storage firm EqualLogix for $1.4 billion, a more than 10-times return for Sigma. That same month, Initiate Systems Inc. filed to raise $75 million in an IPO. By contrast, Virtusa Corp., an information technology consultancy, went public in August at the bottom of its price range and saw its shares drop 15% in the first day of trading. Analysts are more optimistic about GlassHouse's offering. Ben Holmes of Boulder, Colo., IPO research firm Morningnotes.com LLC, said virtualization technology is taking off as data center operators seek ways to cost-effectively expand their storage capacities. Because most servers in a data center don't operate at anywhere near full capacity, virtualization, which partitions a server so it can run more programs, is a way to get more out of each computer. Holmes expects GlassHouse to go public in the second quarter, although numerous factors could change the timing. The company expects to use the proceeds from its IPO for operating capital and to make acquisitions, according to regulatory filings. GlassHouse this year has spent $30 million buying four storage consulting companies in the U.S. and abroad as part of its growth plan. Falvey said that the IPO would give GlassHouse funds to continue its acquisition spree, which would likely target smaller tech consulting firms. Underwriting the IPO is Goldman, Sachs & Co., J. P. Morgan Chase & Co., Banc of America Securities LLC and Thomas Weisel Partners LLC. Gunderson Dettmer Stough Villeneuve Franklin & Hachigian LLP is providing GlassHouse with legal advice, and Ropes & Gray LLP is the underwriters' counsel.  Deal Video
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