Wells Fargo & Co. is making a $25 million strategic bet on a Denver- based software firm that helps automobile dealerships expand to the Internet.
Officials of San Francisco-based Wells said the investment in Navidec Inc. is not its first-and certainly not its last-in an advanced technology company. In March, Wells and AT&T Ventures put a combined $7.6 million into PaymentNet, a provider of Internet-based payments to merchants. (See article at right.)
Navidec, formed in 1993, sells consulting, software, and related services to dealers through its main subsidiary, DriveOff.com Inc.
The subsidiary is an Internet-based alternative sales channel for auto dealers, and it collects fees for customer referrals. Navidec plans to replicate this business model for other industries.
Dick Schliesmann, executive vice president and group head of Wells' auto finance unit, said Navidec's business model "is very consistent with the way we thought the business would mature and evolve."
"Everything that a dealer would typically do is handled through the DriveOff system," Mr. Schliesmann said.
After pending contractual signoffs, Wells would own 10% of Navidec and 20% of DriveOff.com.
The bank completed its due diligence in 90 days, quick by historical standards for the sum involved. But Mr. Schliesmann said the on-line market is changing the nature of business so rapidly that 90 days has become an "incredibly long" amount of time.
Wells Fargo's 7,000 auto-dealer customers will get preferred service during software installations, he added.
The fresh capital will help fund an upgrade of DriveOff.com's interactive Web services. It is expected to have binding price comparisons and maintenance and performance records for specific car models and the dealers that sell them.
The Internet will alter sales practices and reduce purchasing costs at most car dealerships, said Ralph Armijo, president and chief executive officer of Navidec.
"We believe we will transform the way that people buy vehicles on the Internet," he said. "Bricks and mortar will continue to be important but will not be critical to the expansion of any dealer organization."
DriveOff.com's services helped sell more than 38,000 new and used automobiles in the first quarter.
David Keiter, a stock analyst at Joseph Charles & Associates, said Wells Fargo's investment adds credibility to Navidec's on-line efforts.
"Wells is one of the leaders as far as 'electronifying' the banking system," Mr. Keiter said. "Its reputation is a validation of Navidec's story."
Navidec reported first-quarter revenue of $4.5 million, up 162% from a year earlier. Its net loss widened to $767,000, from $465,000.
Mr. Keiter rates Navidec a "buy," and has a 12-month price target of $18 a share. The stock was trading at $11.625 at mid-afternoon on Tuesday, down from its 52-week high of $19.25.
In June, Navidec secured a letter of intent from First Union Capital Markets Group to provide $1 billion in annual funding for vehicle sales originating through DriveOff.com and cooperating auto dealers.