Level 8 finally shows signs of a steep incline.

• Author: Maley, Frank
• Position: Brief Article

For proof that not every technology stock is an instant hit on Wall Street, there's Cary-based Level 8 Systems Inc. Born as Advanced Systems USA Inc. in 1988, it started as a computer consultant, went public at $5.50 a share in 1995 and changed its name to Level 8 in 1996. In 1998, Level 8 switched its focus to making software that links incompatible operating systems.

Two years after it went public, its stock price rose briefly above $20 -- less than half of what Durham-based Red Hat Inc. commanded on its first trade in August -- then plummeted to below $10 as losses mounted and revenues dipped during the reorganization. "They're still losing money, but their growth is beginning to ramp up," says Ed McClendon, a Chicago-based analyst for Advest Inc.

Level 8 was expected to lose as much as $14.7 million in 1999, an improvement over its $23.7 million loss in 1998. Revenues nearly quintupled to $52 million with help from two acquisitions, New Jersey-based Momentum Software Corp. in 1998 and Cary-based Seer Technologies Inc. in early 1999. A third major purchase in late 1999, Dulles, Va.-based Template Software Inc., and newfound interest by some analysts have Level 8 looking like an overnight success. Its stock price shot from about $12 in early November to more than $43 in December and was trading at $40 in early March. "The Template acquisition really, for the first time, gave them enough scale to show up on the radar for a lot of investors," McClendon says.

More important, Template gave Level 8 what, for now at least, is a full range of software and service answers for companies trying to link incompatible computer systems. Many companies use software that can link mainframes, for example, to Microsoft Corp. operating systems for simple tasks such as sending messages back and forth. Level 8, in fact, made a name for itself with FalconMQ, a software that linked Microsoft operating systems to other systems.

But few companies, some of which run more than 100 systems, can retrieve all of their relevant data -- about a bank customer, for example -- on one computer screen. Smoother integration of those systems promises information that's more useful in figuring out what customers want and delivering it in the cheapest way possible.

With Template, Level 8 can pull together all of a company's relevant information, from clunky-but-dependable mainframes to e-commerce transactions, on one screen. "It doesn't mean that now they can sit there sipping...