Today: Xoom breaks Silicon Valley's post-Facebook downturn in consumer-focused Web companies successfully going public. Also: Electronic Arts (ERTS) and Zynga settle their legal beef, Wall Street completes a stable week.
Xoom's success on open market could signal consumer Web is back
Silicon Valley web companies have found success in the IPO market since Facebook forced a freeze with its record-breaking initial public offering in May that quickly went sour, but the companies that found willing investors and rising stock prices were focused on enterprise money. Friday, an Internet company focused completely on consumer cash broke that string, as San Francisco's Xoom brought in $100 million and saw its share price shoot higher on the open market.
Xoom officials pointed out that their business model is not one that shows up a lot anymore -- taking a successful real-world business and translating it to the Web and mobile for the first time. While the Web has matured to the point that there are few of those models available, Xoom seems to have successfully brought international money transfers -- a huge business for the millions of immigrants in the United States -- for the first time.
"We are a disrupter," Xoom CEO John Kunze told the Wall Street Journal. "We've seen this play out before: An offline customer experience that is highly challenged, and [then] that experience is disrupted by digital properties with a better price proposition."
Even more than translating an offline customer experience to the Internet, co-founder Kevin Hartz -- an early investor in online-payments pioneer PayPal -- contends that the company offers a more secure product that is easier on the wallet.
"If you look at the traditional money-transfer companies, they're really fleecing immigrants who are working hard to support their families back home," he told Mercury News staff writer Peter Delevett in an interview Friday.
Growth is likely as well, with Congress and the president pushing for immigration reform that could help undocumented immigrants emerge from the shadows and create a path for other foreign-born, tech-savvy people to emigrate here.
"Anything that's good for immigration is good for Xoom," Kunze said.
Xoom sold 6.3 million shares at $16 apiece, bringing in $100 million at a valuation of more than $500 million, then saw its shares rise more than 50 percent in its first day of trading under the ticker symbol "XOOM" on the Nasdaq exchange Friday.
The company's final price was higher than its original target range, which worried PrivCo CEO Sam Hamadeh, who specializes in private companies. But on Friday, he was more than happy to be proven wrong.
"It's a great company, with strong earnings visibility and a recurring revenue model," Hamadeh said, "so I'm not at all surprised it's trading well."
The only pure-consumer-Web play in the IPO market since Facebook debuted in May was Connecticut-based Kayak, a travel-reservations website that had a successful debut not long after the Menlo Park social network, but was quickly acquired by rival Priceline. But Hamadeh saw signs that Web companies competing for scarce consumer dollars in the wake of the Great Recession had a chance in the debut of another San Francisco company last year, Trulia.
Based on Trulia's success, investors "will take another look (at consumer-focused IPOs), despite being burned so badly by Facebook, by Pandora, by Zynga, by Groupon, by frankly almost everybody. I honestly think they will take at least a second look as opposed to just hanging up the phone when underwriters call," Hamadeh predicted after Trulia's September IPO.
Trulia has an enterprise angle, however, offering real estate professionals a subscription service that Hamadeh says is "a must-have" in the industry. For that reason, it is usually lumped together with the successful enterprise IPOs Silicon Valley has enjoyed since Facebook, such as Pleasanton cloud-software company Workday, Sunnyvale Wi-Fi firm Ruckus Wireless and security company Palo Alto Networks.
That leaves Xoom alone as evidence that Web-focused companies dependent on consumer spending can find IPO investors as well as demand on the open market, good news for local startups like Uber.
Tech stocks decline slightly as Wall Street continues to trade flat
The rest of Wall Street was calm yet again Friday, none moving more than the 0.2 percent drop the tech-heavy Nasdaq suffered, completing a week when indexes stabilized after starting the year shooting higher.
In Silicon Valley, the SV150 index joined the Nasdaq in losses, losing 0.4 percent. Apple (AAPL) dropped after the impetus for its weak Wall Street performance was made public Thursday declining 1.4 percent as Apple bull Gene Munster predicted a new round of consumer devices and a group reported that billions of dollars worth of iPhones are sitting unused. Facebook dropped 0.6 percent after defending teenagers' privacy rights in its new Graph Search system, then announced after the bell that it was a victim of a hacking attack. Tesla declined 3.3 percent as it continues to deal with the fallout of CEO Elon Musk's battle with the New York Times on its Model S review. In a typical move on an IPO day, companies that recently went public dropped as investors sold shares to buy in to the next new thing: Ruckus took the biggest hit, dropping 13.8 percent; SolarCity dropped 3.6 percent, Workday declined 1.1 percent and Palo Alto Networks lost 1 percent. SunPower's (SPWRA) surprising positive run ended with a 5.6 percent drop to $11.45.
In positive moves, Google (GOOG) gained 0.6 percent to again establish all-time highs, moving near $800 with a close at $792.89 despite an outage early in the day. NetApp continued to move higher after its Wednesday earnings report, gaining 1.9 percent, and Yelp increased 2.4 percent.
Video game war has power turned off before big battle
Two of the biggest Silicon Valley names in gaming settled their dispute before they could do full battle in a courtroom, with Electronic Arts and Zynga calling off their legal battle Friday.
Redwood City-based EA sued the social-gaming company, claiming that it completely ripped off EA's "The Sims Social" to build "The Ville." San Francisco-based Zynga countersued, saying EA had attempted to block workers from leaving its offices to go work for Zynga.
Both companies confirmed the settlement, but no terms were released. EA stock dropped 1.1 percent on the day, while Zynga declined 1.5 percent.
Silicon Valley tech stocks
Down: Ruckus, SunPower, SolarCity, Tesla, Jive, Zynga, Advanced Micro Devices, Hewlett-Packard (HPQ), Apple, Workday, EA, Palo Alto Networks, Yahoo (YHOO), Facebook, Symantec, Intel (INTC), Applied Materials
The tech-heavy Nasdaq composite index: Down 6.63, or 0.21 percent, to 3,192.03
The blue chip Dow Jones industrial average: Up 8.37, or 0.06 percent, to 13,981.76
And the widely watched Standard & Poor's 500 index: Down 1.59, or 0.1 percent, to 1,519.79
Check in weekday afternoons for the 60-Second Business Break, a summary of news from Mercury News staff writers, The Associated Press, Bloomberg News and other wire services. Contact Jeremy C. Owens at 408-920-5876; follow him at Twitter.com/mercbizbreak.