Q-Up Systems Inc. seems a likely candidate for an eventual initial public offering, but the Internet banking software developer is shunning the public markets.

As a private company, Q-Up avoids the pressures of producing consistent revenue growth, allowing it to pursue its goals of providing competitive products at low prices, said Dan Martin, president.

"Though we are dealing with the Internet, we have not structured this thing as an IPO baby or a venture capitalist's baby," he said.

Q-Up's strategy is markedly different from those of its closest competitors, such as nFront Inc. and Online Resources and Communications, which are involved in IPOs.

In fact Online Resources' initial public offering occurred Friday. The stock opened at $14 a share, raising $43.5 million for the company. The stock closed at $14.0625.

But Austin, Tex.-based Q-Up believes, Mr. Martin said, that it can compete in the "close-knit" community banking market, where word of mouth plays a crucial role in fostering sales.

The company has sold its Internet Banking System to 175 banks in 32 states, including $1 billion-asset Stillwater National Bank in Oklahoma and $2.2 billion-asset Laredo National Bank in Texas.

Q-Up said it expects $10 million of revenue this year, and it said its conservative business approach has already yielded operating-profit margins in the mid-20% range.

Running an Internet company means that things "move faster, the valuations are higher, and everyone expects a little more," Mr. Martin said. "But the fact of the matter is that it is still a business, and you need to run it like a business. We do."

Q-Up has aligned itself with other respected community bank vendors, like Herndon, Va.-based Treev Inc., which has sold document imaging and workflow software to 2,000 banks.

For bill payment processing, it uses Princeton Telecom's electronic lockbox processing services, avoiding the more expensive Checkfree Corp., which charges $4 to $6 a month per retail customer.

Using Q-Up's software, banks pay $1 a month per customer.

Gary Craft, director of research at E-Offering, an investment banking affiliate of E-Trade Group, said remaining private would inhibit Q-Up's ability to compete with publicly traded companies that have more access to capital. He also said Q-Up would be at a disadvantage when competing for quality skilled labor.

"They'll have a rough go of it," Mr. Craft said. "How do you compete for employees on purely a salary basis when employees can get stock options as a way of getting compensated?"

Mr. Martin countered that Q-Up is a 100% employee-owned company that has not ceded large stakes for paltry sums to outside investors such as IPO- minded venture capitalists.

He said he believes the Internet banking market is truly vast and growing. "If we do sell 30% of our company," he said, "I guarantee you it will not be for $3 million. You can add a zero to that."

Mr. Martin further asserted that Austin is a "hotbed" of technological activity and employees must decide who will become winners. "If we do give up a chunk, it will be for all the money we will ever need and for whatever we need to do," Mr. Martin said. "The remaining ownership stays within our four walls."

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