THE TIMES 100 : High-Techs Top List of New Issues : The computer boom is driving interest in California companies that make networking devices.

The hottest new California stock issues of 1994 are mostly in the business of getting information from Point A to Point B--and moving it faster, easier and more cheaply.

Companies involved in computer and telecommunications networking dominate the Times list of best-performing California IPOs, or initial public offerings, measured from their 1994 offering prices to market prices on April 13.

At the top of the list: Ascend Communications, a 6-year-old Alameda-based firm that floated 2.2 million shares to the public last May 13, at $13. The stock has since skyrocketed to $71, a 446% rise from the IPO price.

Ascend makes products that allow remote users--say, a corporate branch sales office--to communicate quickly and easily with the headquarters-office computer network. Instead of leasing 24-hour phone lines between offices, companies using Ascend’s technology can essentially “pay as they go”--send or retrieve large amounts of information on demand and at very high speeds.

“They’ve really made a name for themselves,” says communications-technologies analyst Noel P. Lindsay at brokerage Hambrecht & Quist in San Francisco.

Indeed. In the quarter ended March 31, Ascend’s sales jumped 200% from a year earlier, to $20 million, while earnings soared 169% to $3.47 million.

The networking boom is a natural outgrowth of the huge volume of personal-computer sales since 1990. The machines are out there; now they need to be tied together (at the corporate level) or tied into independent data bases via the Internet (at the home level). Or both.

Networking technology initially focused on routers that subdivided computer work groups into local networks and allowed them to communicate with each other. Now the hot trend is so-called switching systems that allow companies to assign individual computers to be part of any number of “virtual” networks.

“If you’re going to have all of these (information) services available on demand on desktops, you need software and switching systems to make it happen,” says Terie Murphy, analyst at Smith Barney in San Francisco.

Because the urge to network is so strong, young Silicon Valley companies that offer better networking mousetraps have found a ready audience for their stocks.

Besides Ascend, other California-based networking companies that made well-received initial share offerings last year included Network Peripherals, which competes in the fastest-growing segments of network switching; Alantec, one of the first facilitators of virtual networks and one of the premier names in high-end network products, and Digital Link, which makes digital access products used in telephone company network systems, among others.

As the stocks have zoomed, however, so has the risk in owning them: Many networking stocks sell for stratospheric prices relative to earnings per share. At $71 a share, Ascend is valued at 95 times 1994 earnings. Investors’ assumption is that the company’s dramatic earnings growth will continue for many years.

But by definition, technology is ever-changing. Wall Street has no way of knowing which of the young networking companies are survivors, and which will be usurped by future technology or by sudden competition from bigger, established firms like 3Com Corp. or Cisco Systems.

Ascend Communications’ chief financial officer, Robert Dahl, concedes that while 3Com and Cisco “have not played (in key Ascend markets) . . . we expect that they will.”

Nonetheless, he notes that Ascend isn’t just selling a box of wires. “We really consider ourselves a software company,” he says. “The proprietary technology is in the software.”

More conservative investors, hunting for value among 1994 California stock offerings, may prefer to look elsewhere--to Long Beach-based tableware maker Mikasa Inc., for example, priced at about 12 times 1994 earnings; or to Reliance Steel & Aluminum, which has slumped 12% from its IPO price.

Reliance, a metals processor and distributor, has caught the attention of Century City money manager Michael Halpern of Dorchester Advisors Inc. Not a steel mill, Reliance is a service firm. “It buys chunks of steel and sells them to metal benders,” Halpern says. With the stock price at seven times earnings and below book value, Halpern thinks it’s a major bargain.

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Biggest IPOs of1994

California-based firms ranked by dollar amount of offering.

Offering Rank Company ($ millions) 1 Mikasa Inc 53.1 2 MTI Technology Corp. 51.3 3 CIDCO Inc. 50.3 4 ORTEL Corp. 49.4 5 Petco Animal supplies 48.0 6 Reliance Steel & Alum. 48.0 7 Plantronics 44.9 8 REDFED BANCORP Inc. 43.7 9 Sports Club Inc. 41.9 10 Strouds Inc. 41.3 11 C-Cube Microsystems 36.0 12 Digital Link Corp. 35.7 13 Alantec Corp. 32.5 14 Parcplace Sys Inc. 31.5 15 Applied Digital Access 31.2 16 Variflex Inc. 31.0 17 Spectrian Corp. 30.3 18 Simpson Manufacturing 30.1 19 VIVUS Inc. 30.1 20 Gasonics Intl Corp. 28.6 21 Micro Linear Corp. 28.1 22 DSP Group Inc. 28.0 23 Cerplex Group Inc. 27.3 24 Cinergi Pictures Ent. 27.0 25 Ascend Commun. Inc. 26.0 26 Epic Design Tech. Inc. 26.0 27 Pinnacle Sys Inc. 25.0 28 Micrel Inc. 24.3 29 Thompson PBE Inc. 24.2 30 Copart Inc. 24.0 31 Mattson Tech. Inc. 24.0 32 Videonics Inc. 22.0 33 SUGEN Inc. 20.0 34 Edelbrock Corp. 20.0 35 Educational Insights Inc. 19.5 36 Global Village Com. 19.2 37 Ministor Peripherals 18.9 38 Protection One Inc. 17.6 39 Orbit Semiconductor 17.3 40 Inhale Therapeutic Sys. 16.1 41 Sonic Solutions 16.1 42 Safety Components 16.0 43 ThermoLase Corp. 14.1 44 Quality Semicnductor 13.5 45 Fpa Medical Management 13.0 46 Microtec Resh Inc. 12.0 47 Network Peripherals 12.0 48 Wavefront Technologies 11.5 49 LXR Biotechnology 11.3 50 Media Arts Group Inc. 9.1 51 Geoworks 9.0 52 Java Centrale Inc. 9.0 53 Microelectronic Pack. 8.0 54 Haskel International 7.5 55 Sirena Apparel Group 6.7 56 Jalate 5.9 57 Sigma Circuits Inc. 5.5 58 Software Profes. 5.5

Note: List includes all “S-1” filings except for complex deals consisting of units.

Source: IPO Crossroads

IPOs: How They Fared

Companies ranked by change in stock price since initial 1994 offering.

(Please refer to the microfilm.)