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Not Just Another Nasdaq Startup

Count on San Francisco upstart to do things differently -- even its initial public offering. The seller of customer-relationship management software filed notice with the Securities & Exchange Commission on Feb. 17 that it expects to list its shares on the New York Stock Exchange rather than Nasdaq.

That's a switch -- and another attention-grabber from a company that's masterful at generating marketing buzz. Most new tech outfits go public on the younger of the two stock exchanges. That's mainly because it's cheaper and easier to qualify, but many tech startups also like to be associated with the more tech-savvy Nasdaq.

Salesforce executives declined to comment on their decision, citing their government-enforced quiet period ahead of selling stock to the public. But the move "shows a certain level of panache," says David Menlow, president of IPO Financial Network, a market-research firm. "Getting a listing on the NYSE is a validation that you're a real company and not a dot-com that could turn into a dot-bomb." Morgan Stanley is the lead investment bank, and Salesforce hopes to raise $115 million in the offering.

PRE-APPROVED? Ironically, it was the NYSE that pursued Salesforce rather than the other way around. After Salesforce first filed plans for an IPO last Dec. 18, NYSE execs approached it about establishing a home on the exchange. They made presentations in San Francisco and New York, and former NYSE President Richard Grasso even met with Salesforce executives. "We're absolutely thrilled they want to list with us," says Noreen Culhane, executive vice-president of the NYSE corporate listing and compliance division.

The NYSE reviewed Salesforce and decided that its financial standing and corporate-governance policies qualify it for a listing. Salesforce still has to go through the formal process of applying for membership, but Culhane say it has essentially been pre-approved.

An ongoing rivalry between the NYSE and Nasdaq that has intensified this year might have had something to do with the courtship of Salesforce. The NYSE is the older and bigger exchange, but heated competition has it turning to tech upstarts and elsewhere for business.

PIPSQUEAK RISING. Among investors, Wall Street analysts, and other tech upstarts, the Salesforce IPO - along with one expected for online search engine giant Google -- is generating more than the usual share of interest. It's one of the few dot-coms to go public since the Nasdaq tech stock crash, and the question is whether the IPO market for Internet companies might be poised to take off again.

Since launching in 2000, Salesforce has amassed 8,000 business customers that like its model of providing software as a service for a monthly fee, rather than selling expensive packaged software that customers have to install and maintain. It recorded revenues of $50.1 million for the fiscal year ended Jan. 31, 2003, up more than 100%, and a loss of $9.3 million.

Of course, Salesforce is still a pipsqueak in the $7 billion market for customer-relationship management software, called CRM. That industry is dominated by the likes of software giants Siebel Systems (SEBL) and SAP (SAP). But those more established players are taking the threat seriously. Siebel recently launched a product that competes with Salesforce's CRM-as-a-service offering.

Clearly, though, Salesforce and its feisty chief executive, Marc Benioff, are on the offensive. The company's NYSE ticker symbol? It's CRM. By Steve Hamm in New York

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