Micom in New Wall Street Bid : Stock: Computer interlink maker opens third attempt to sell securities to the public to reduce its debt burden.

For a company that makes devices to link computer equipment, Micom Communications Corp. has seemed at a loss to make a solid connection with Wall Street.

Micom is a Simi Valley-based unit of MB Communications Inc., a Lawrence, Pa.-headquartered concern whose other subsidiary is Black Box Corp., a leading marketer of computer gear by mail. For the third time in four years, MB is attempting to sell securities to the public to reduce its onerous debt burden. Its two earlier attempts, in 1989 and 1990, failed.

MB blamed “market conditions” for the two canceled offerings. But the offerings also had plenty of critics, who said MB was a financial mess that provided so much risk it should be avoided by investors.

This time, the company is offering 2.5 million common shares at an anticipated price of about $12 a share, which would generate $26.4 million in net proceeds that MB would use to further pare its debt.

Executives of privately held MB, which is mostly owned by a New York investment firm, Odyssey Partners, declined to elaborate beyond the offering’s prospectus, citing the “quiet period” while a stock sale is pending. But Michael Murphy, editor of the California Technology Stock Letter, said “they’ll probably get it done this time” because investors lately “have gotten enthusiastic about communications networking products.”

Indeed, he cited the blockbuster debut of NetWorth Inc., an Irvine maker of computer networking gear that went public Nov. 25 at $16 a share and then doubled in price in less than a week.

But, in reference to MB, Murphy also cautioned that “everyone is still gun-shy of a company loaded with debt.”

It’s also in question whether MB’s recent performance represents enough of a track record to appeal to investors, particularly in the case of Micom, which was much weaker than Black Box in the late-1980s but has rebounded during the past 18 months. (Black Box accounts for roughly two-thirds of MB’s business, Micom a third.)

From fiscal 1986 (ended March 31) through fiscal 1991, Micom suffered operating losses in five of those six years, including an operating loss of $6.1 million on revenue of $56.1 million in fiscal 1991. Throw in $30 million of debt-interest costs and other expenses, and MB overall had a net loss of $52.7 million in fiscal 1991 on revenue of $158.3 million.

The Black Box subsidiary, also based in Lawrence, in contrast, sustained operating earnings from fiscal 1990 through 1992--including a $25.2-million operating profit in fiscal 1992--and its catalogues are considered to have a loyal customer base.

But Micom’s business also began turning up in fiscal 1992. Micom that year had an operating profit of $3.2 million on revenue of $61.2 million, and with the help of its debt restructuring, MB overall earned $56.9 million on revenue of $169.2 million. And for the six months ended Sept. 30, MB earned $4.8 million on revenue of $91.4 million.

Micom’s gains, in fact, persuaded MB to cancel its plans of two years ago to split MB in half by spinning off Micom to Odyssey Partners while taking Black Box public.

The upturn at Micom, which employs 350 people, stems from the company’s shift from providing products largely for connecting mid-sized minicomputers to so-called “integration” products, which Micom calls Marathon and NetRunner.

These devices enable small- and mid-sized firms to connect their personal computers, printers, telephones, fax machines and other equipment on existing leased communications lines without having to pay extra line costs.

It’s a growing market, Murphy said, because small firms are increasingly anxious to connect their growing inventories of PCs, fax machines and the like without incurring major expenses. Micom said its Marathon/NetRunner sales soared to $21.3 million in fiscal 1992 from $3.2 million the prior year.

MB’s big debt was largely incurred in 1988 when a group led by Odyssey Partners and former junk-bond powerhouse Drexel Burnham Lambert Inc. engineered a $334-million leveraged buyout (LBO) of the company, meaning they borrowed most of the cash.

The debt quickly became too much for MB, particularly because of Micom’s struggles. And after its two trips back to the public market came up empty, MB was forced to seek help from its creditors to restructure the company’s balance sheet.

That restructuring was accomplished through a brief, creditor-approved “prepackaged” excursion through U.S. Bankruptcy Court, from which the company emerged Jan. 14. In the process, MB’s slashed its overall debt to $139.6 million from $246.1 million. Its long-term debt alone stood at $123 million as of Sept. 30.

Now MB is attempting a “reverse LBO” with its public stock offering, which is being co-managed by Donaldson, Lufkin & Jenrette Securities Corp. and Montgomery Securities.

But even if the offering succeeds, the company will still largely be Odyssey Partners’ show. Odyssey’s stake in the company (including warrants it holds) will still be 48%, and three men on MB’s nine-member board will be Odyssey principals, including MB’s chairman and president, Michael E. Barker. New Street Capital Corp., the successor organization to Drexel Burnham Lambert, also would own 12% of MB’s stock.

The stock sale also would not end Odyssey’s problems at MB. The company concedes that even with the sale’s proceeds, MB “will continue to be highly leveraged and will have significant annual debt-service requirements.”

Translation: If MB’s business hits rough sledding, its debt could again become a crushing burden.