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— The "M.D." in Harry E. Gruber, M.D., should stand for Mach Dollar. In the past, he has amassed dollars at Mach speed as companies he helped found went public and then were sold quickly for a fat premium. But the latest company he founded, Kintera, is stumbling along at anything but Mach speed.

Kintera's mission is to provide software that permits nonprofit institutions to use the Internet, particularly in fund-raising.

The ill winds (Katrina, Wilma, etc.) should blow Kintera some good. They have in one sense: revenues are up stoutly. But costs are up even more. The company has never made money since launching operations in 2000, and losses are getting worse, despite the flood of charitable donations in response to the worldwide natural disasters.

The company recently admitted that questionable accounting was prettying up its bottom line. It had to restate its losses downward.

After going public in late 2003, Kintera made eight acquisitions. That's Mach speed -- the corporate equivalent of a category four hurricane. The company admits that integrating these new companies could be a problem.

And the jury is still out on Kintera's business model: the Internet is not used significantly to raise charitable donations, and there is a possibility it won't be.

The company went public December 19, 2003, at $7. That day, the stock shot up almost 50 percent to $10.30. By mid-April of 2004, it was above $17. But it was all gas. Now the stock is around $2.55. On November 9, the company comes out with its next quarterly earnings statement. A disappointment will probably bring more selling.

When Kintera went public less than two years ago, the cumulative deficit was $31 million. Now it's almost $75 million. For the six months ended June 30, the company lost $21.8 million compared to a loss of $8.9 million for the same period a year earlier. Operating expenses more than doubled in both the quarter and the six months. Because of disaster-related business, revenues were up 120 percent over six months. But the cost of achieving those revenues was up 187 percent.

On August 11, to no one's surprise, the company announced it was laying off 10 percent of its workforce to get those costs under control. It adjusted its future sights downward. It had earlier said it would become profitable in the current year's second half. It delayed that expectation until early 2006.

On August 15, Kintera announced that it had made accounting errors. It had capitalized costs that should have been considered operating expenses. It's the old trick of classifying a cost as a long-term investment item instead of charging it to current operations. That was the sleight of hand WorldCom was performing. For Kintera, it was a big write-down: the company restated its first-quarter loss from $10 million to $11.7 million.

After the mea culpa, a shareholder sued, charging certain officers and directors with breach of fiduciary duty, abuse of control, gross mismanagement, waste of corporate assets, and unjust enrichment. Kintera says the suit is without merit.

In its most recent quarterly report, the company lamented, "We will need to increase revenue and reduce operating expenses to achieve profitability, and we may not be able to do so."

In the quarterly report, Kintera listed the eight acquisitions it made last year and this year and confessed, "We cannot assure you we will succeed in completing integration efforts on a timely basis, or at all."

"The company has not found a way to make money," says Bud Leedom, publisher of California Stock Report. Intense price competition may be a factor. "They don't disclose what pricing is. These guys are fighting to win the business and not watching the bottom line." Leedom wonders if the business plan will be successful: "There is a question if online charitable giving is a viable model. A small amount of charitable giving is over the Internet. The bulk of donations are made by large organizations or rich individuals; the Internet may not be a medium for these types of givers."

There are tough competitors: eTapestry, B2P Commerce, MicroEdge, and Convio, among others. Some big fellas are in: Microsoft, PeopleSoft, Intuit, and Sage. But the market would appear big enough for all, and then some: worldwide giving is $600 billion and growing at 7.8 percent a year.

The leading company is South Carolina's Blackbaud, which provides both software and other services to charitable organizations. The company is profitable. "We love this software firm," gushes research firm Morningstar, Inc., lauding Blackbaud's "fantastic business." Standard & Poor's gives it an investability rating of 81 out of 100 -- very good.

John Moores's JMI Equity owns 3.47 percent of the stock; a former JMI employee is Blackbaud's chief executive. San Francisco's Hellman & Friedman owns 37.7 percent. The firm's chairman, Warren Hellman, is father-in-law of Robert C. Dynes, former chancellor of University of California, San Diego, onetime backer of Moores's ballpark hustle, and now president of the University of California system.

Gruber is a former geneticist and rheumatologist at UC San Diego. He left in 1986 to cofound biotech Gensia Pharmaceuticals. He served as its chief scientist and was instrumental in the founding of two related biotechs, Aramed and Viagene, which were sold for good prices.

Gensia stock crashed in the early 1990s as its leading drug candidate failed. The beleaguered company was sold; subsequently, so was the company that bought it. In an interview last year with the Chronicle of Philanthropy, Gruber said he had been fired by David Hale, chief executive of Gensia. That's no disgrace: after the Gensia debacle, Hale went on to Women First HealthCare, which went bankrupt, and now CancerVax, which last month plunged 44.5 percent in one day after poor trial data forced it to abandon research on its leading drug candidate. CancerVax slashed employment by more than half.

After his gains from the buyouts, Gruber was worth $50 million, according to the Chronicle of Philanthropy story. Then Gruber rode the late-1990s bubble to riches. Fasten your seat belt. He formed Intervu, a company specializing in audio-video delivery for the Internet, in the mid-1990s. He took it public in mid-1998, and by early 2000 its stock was selling for $173.63. In February of 2000, just one month before the bubble burst, he announced it would be sold to Massachusetts-based Akamai Technologies for $2.8 billion in stock. At the time of the announcement, Akamai was selling for $228.63 (having dropped from $345.50 in early January). On April 20, when the merger was consummated, Akamai stock was down to $86.94. It ended the year at $21.06 and in 2002 was as low as 56 cents.

The Chronicle of Philanthropy story says Gruber netted $250 million on the deal. But much would depend on how soon he was able to dump the plummeting Akamai stock that he had received, and at what prices. However, neither Kintera nor Gruber will respond to questions.

Don't weep for Gruber: Kintera insiders got their shares for 77 cents apiece. So the stock can sink a long way before the doctor is ailing.

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