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5 IPOs Tech Needs Now

Scott Moritz
Tuesday, 13 Jul 2010 | 1:21 PM ET

Tech investors have been sorting through some seriously stale inventory lately.

Young men play online games at an internet cafe in Beijing.
Liu Jin | AFP | Getty Images
Young men play online games at an internet cafe in Beijing.

The market, outside the Apple aisle, is lined with shelves of picked-over dregs: Intel, EMC, Oracle , IBM.

So how's a stock buyer expected to get excited about a bunch of moldy names that have outlived their expiration dates?

What happened to the fruit of Silicon Valley's lush fields of innovation? Where are those garage-conceived varietals, carefully nurtured by venture capitalist, hand-picked by investment bankers and trucked by special delivery to Wall Street?

For the past three years, big tech companies like Apple, Microsoft , Hewlett-Packard and Cisco have taken the fun out of the game. Content to grow revenue, squeeze costs, hoard cash and crush competitors, the hunkering giants have flattened the once-vibrant tech sector.

But judging by a list of companies registered to go IPO in the coming months, there seems to be nothing tasty in the pipeline for investors with an appetite for new equity issues.

Wall Street needs a new crop of hearty growth stocks, something big and juicy like a new Google or maybe a crisp young Apple.

Here are five private tech companies that investors would love to sink their teeth into.

No. 5: Swype

Touch-screen gadgets. Love them or hate them, they aren't going away. Swype makes a touch-screen typing application that lets you drag your finger from key to key rather than tap out the letters. Users say they find Swype faster and more accurate.

The Seattle shop has 35 employees and doesn't have immediate plans of going public, said CEO Mike McSherry. The company mission is simple: Sell Swype to as many telcos and phone makers as possible.

Swype has made inroads at Google's Android effort and is expected to be available later this year on the Motorola(MOT) Droid X. Samsung and HTC phones are also included in the list. But one name is missing -- Apple. And that's not likely to change anytime soon.

"I don't think they like the fact that we work with other companies," McSherry said at the recent Verizon Droid X introduction show in New York.

Apple is so touchy. Swype would give investors a software company that supplies nearly all the cutting-edge superphone makers. But the company might also get tossed aside by the next input-software star on the block.

No.4: Pandora

Adored by tweens and grandparents alike, Pandora seems to have cracked the code on free music services. The company hired experts who slice apart music into its component sounds as part of what it calls its Music Genome Project. Pandora asks you to name a song or artist, then uses the info to match music that may have similar characteristics.

Internet music was always seen as curtains for satellite radio, the inevitable Sirius killer. And Pandora may have delivered. Last year, as Sirius lost half a million subscribers, Pandora doubled its user rolls to 40 million. The service is Web-based, which means you can log in and hear your so-called stations on any Net device including phones.

The Oakland, Calif. outfit raked in a reported $50 million last year in advertising and subscription revenue, managing to swing to a profit at year-end. With a music licensing deal reached a year ago, some of its growth hurdles have been cleared, but giants like Google and Apple also have plans to make it big in Internet music.

When was the last time investors got to play music in the key of G for growth?

Twitter and Facebook

No. 3: Twitter

Finally, a written medium to fit our attention span. With 140 characters available per Tweet, Twitter is molding a nation of concise writers who have to nail a headline -- or get straight to the point -- while supplying a story link to followers.

Twitter's micro-blogging service speaks to the masses. It also fields some 800 search requests a day from users, according to co-founder Biz Stone. Location aware applications of Twitter are no doubt in the works and news outlets are only just beginning to get Tweets to news hounds.

Ideally suited for mobile devices and a growing force in Internet search, Twitter, with more than 75 million users, has just the sort of sugary buzz that IPO fans crave.

No. 2: Facebook

Can nearly half a billion people be wrong? Successor to News Corp's MySpace and Yahoo's GeoCities, Facebook now claims 400 million users. And apparently half of those people check in daily for a laugh, a dose of gossip and maybe a gander at their friends' ridiculous adventure photos. Andrew's vacation beard, for example, was totally unnerving.

For lack of a better comparison, Facebook, with an estimated $800 million in annual revenues, is a bit like a pre-IPO Google in the sense that it is capturing an ever-larger share of Internet traffic on a daily basis, albeit more slowly then it did as an upstart. But it remains to be seen whether Facebook can ever collect as much revenue from that traffic as Google does. To be sure, the sheer volume of users suggests a wealth of potential.

However, continual privacy snafus and a troubling advertising scheme that promises to turn friends into shills certainly work against Facebook. But investors may be willing to dismiss that for the chance to take a whack at an Internet giant that might be as big as, well, Google.

No. 1: HTC

Taiwan's High Tech Computer started as one of the nameless shops that supplied phones to telcos like Sprint . HTC's advantage, if you will, was its focus on making smartphones for a post-PC era.

In ten years, HTC has gone from making thick, clunky, slow phones to being one of the industry's top design leaders. When other players crumbled in the face of Apple's iPhone, HTC rose to the challenge as one of the most formidable competitors. HTC, with about $4.6 billion in annual revenue, has become what top phone shop Nokia should have been.

The ultra-slim, glass-faced touch-screen Droid Incredible and the Sprint EVO pack some of smartphones' most advanced features, like Qualcomm's Snapdragon processor and soon, the next version of Google's Android operating system. Demand for those phones, like the iPhone, have far exceeded supply.

While Palm failed to deliver and RIM choked and Microsoft stumbled, HTC has nimbly stayed attuned to the mobile Internet trend. Investors could use a company like that right about now.

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Disclosures:

Disclosure information was not available for Scott Moritz or his company.

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