Paul Hamerman, an analyst with Forrester Research, says Salary.com could use funds from an initial public offering of stock to expand its product lineup through an acquisition. A possible target, in his view, would be a firm that provides technology for employee development or recruiting. But, Hamerman warns, an IPO won’t necessarily overcome the firm’s reputation as a niche specialist.

“They’re not well known as a performance management player,” he says. “It’s a challenge for a company named Salary
.com to go to market selling a broad set of talent management products.”

In mid-November, Salary.com filed a registration statement with the U.S. Securities and Exchange Commission relating to a proposed initial public offering of its common stock. The Waltham, Massachusetts-based company declined to answer questions about the filing, including when it expects an IPO to take place or how much money it hopes to raise.

The filing, though, provides details about Salary.com’s operations. For the year ended March 31, Salary.com’s revenue totaled $15.3 million, up from $10 million the previous year. But the company’s net loss has widened in recent years to $3.1 million for the year ended March 31.

According to the filing, the company intends to use proceeds from the IPO for purposes including “possible acquisitions and investments.”

Salary.com is well known for providing consumer salary information. For organizations, its compensation management products are designed to help customers figure out how much to pay new and existing employees and run overall compensation programs. Among Salary.com’s products is TalentManager, which is a set of tools for linking pay to performance. It includes software for setting goals and tracking performance.

Applications for tasks such as compensation, performance and learning management have been hot sellers, as companies appreciate the value created by workers and seek to pinpoint top performers.

SAP and Oracle, along with smaller HR tech players such as Taleo and SuccessFactors, sell talent management applications. Consolidation already is under way in the arena.

Jim Holincheck, an analyst with research firm Gartner, says Salary.com has not come too late to the talent management party. “It’s still very early on,” he says. “Most firms are still dependent on Microsoft Word for their performance appraisals.”

But he warns that should Salary.com go public, it will have to generate plenty of growth to justify the increased overhead that comes from being a publicly traded company, such as complying with Sarbanes-Oxley regulations.

Yankee Group analyst Jason Corsello argues that Salary.com’s relatively small revenue and its lack of profitability may give investors pause. But if the stock is a hit, he says, other talent management vendors could follow Salary.com’s lead. “It could definitely be a catalyst for lots of companies to go public.”

—Ed Frauenheim