Backlog of IPOs Could Contain a Slew of Home-Grown Nuggets
The fall crop of initial public offerings holds the potential for several blockbusters from California companies, said analysts, who predict a strong IPO market for the rest of this year.
This holiday-shortened week and next week will be slow, as usual, but expect Wall Street bankers to begin bringing out a backlog of IPOs in late September and October as they rush to get the deals sold--and pocket lucrative fees--before year’s end.
“After the bankers get back from vacation and start on some road shows, well, it’ll be pedal to the metal until the end of this year,” said Ben Holmes, president of IPOPros, a Boulder, Colo., data firm.
Shares from companies involved in the wireless, optical and infrastructure software areas will be in demand by IPO investors this fall, analysts said.
What’s the hottest asset for a company entering the IPO market these days? Profit.
What’s cold? Companies involved in anything with an “e” in front of it, such as e-business, e-commerce or e-solutions. These will have trouble attracting market interest, analysts said, in part because many of these companies are bleeding red ink and these types of Internet firms suffered dramatically during the severe market downturn in March and April.
Analysts expect strong performances by Ixia, a Calabasas-based provider of high-speed network systems; Kabira Technologies, a San Rafael, Calif.-based maker of infrastructure software; Qualcomm Spinco, a San Diego maker of circuits and system software; OpLink Communications, a San Jose maker of fiber-optic components; and Santa Clara, Calif.-based Computer Access Technology.
Here’s a closer look at some of those deals:
* Ixia: Founded in 1997, this company provides high-speed network systems to customers such as Cisco Systems and Broadcom. Analysts like this firm not only for its high-growth business, but because it is profitable, with earnings last year of $4.8 million on revenue of $24.5 million. For the first six months of this year, the company was also in the black, with $2.3 million in profit.
The company, which never had formal venture-capital backing, has filed to raise $57.5 million through underwriters Merrill Lynch and Donaldson Lufkin & Jenrette. Share price is not yet available. The stock is expected to be listed on Nasdaq under the symbol XXIA.
“Ixia is by far the best-looking deal on the calendar right now from California,” Holmes said.
* OpLink: This designer and maker of fiber-optic components has filed to raise $172.5 million through underwriters Robertson Stephens and CIBC World Markets. For the nine months ended March 2000, the company reported $3.2 million in profit on revenue of $20.6 million, versus a profit of $590,000 on revenue of $5.3 million for the same period a year earlier. The expected share price range is $10 to $12.
Customers include Cisco, Lucent Technologies and Nortel Networks. The stock is expected to trade on Nasdaq under the symbol OPLK.
* Qualcomm Spinco: Analysts like this company’s business, and they also like the Qualcomm name--one of the best in the wireless field.
The company has filed to raise about $100 million, but analysts predict the deal could be bumped up to $300 million or higher once additional terms are revealed in a future filing. The lead underwriter is Lehman Bros., with Goldman Sachs & Co. as co-lead.
Of course, the fall IPO backlog includes its share of California companies that analysts say are less of a slam-dunk.
Those deals include Los Angeles-based Adexa; Mountain View, Calif.,-based Docent; Mountain View-based Market First Software; and Artisan Entertainment, a Santa Monica movie distributor.
* Adexa, maker of software that enables what it calls “collaborative commerce, or c-commerce,” is attempting to differentiate itself from the e-commerce space, analysts say. The company argues that c-commerce, a term coined by analysts at the Stamford, Conn., technology research firm Gartner Group, better defines what it does--helping companies manage complicated supply chains.
“E-commerce is just buying and selling. What Adexa does is so much more,” said Karen Peterson, an analyst with the Gartner Group who said Adexa’s software helps companies figure out their purchasing needs in advance and communicate those needs to suppliers. While such software is in great demand, Adexa has several competitors.
For the first six months of this year, Adexa lost $3.1 million on revenue of $21.7 million.
Formed in 1994, the company’s clients include Advanced Micro Devices and Matsushita Electronics. Lead underwriter on the $75-million IPO is Chase H&Q.; Once public, the company will trade on Nasdaq under the symbol ADXA.
* Docent: This firm, whose products and services help large organizations exchange information on the Internet, posted revenue last year of less than $1 million, but filed for an IPO that could give it a market capitalization of more than $300 million. That’s a red flag to many investors, according to analysts, who predict the per-share price will have to be cut to get this IPO done.
The company has filed to raise around $80 million by selling 9 million shares at $8 to $10 through lead underwriter Deutsche Banc Alex. Brown. For last year, the company reported a loss of $20.1 million on revenue of $800,000, compared with a loss of $6.4 million on revenue of $500,000 the previous year. The stock is expected to trade under the symbol DCNT on Nasdaq.
* Artisan Entertainment: This one has analysts divided. The Santa Monica independent distributor behind the low-budget horror hit “The Blair Witch Project” also has a library of 3,300 feature films, including domestic video rights to such movies as “Basic Instinct.” Some say the company, launched in 1997, is a one-hit wonder, noting that other releases, such as “The Limey,” haven’t come near the box-office success of “Blair Witch.” And they note that as investments, movie companies in the past have had a mixed record at best.
But other analysts call Artisan, which has been shooting a sequel to “Blair Witch,” a good “content” play.
And they note that Artisan is profitable, earning $13.8 million on revenue of $383 million for the fiscal year ending in December, versus a profit of $1.2 million on revenue of $173 million for the same time the previous year.
Artisan has filed to raise as much as $140 million through lead underwriter Merrill Lynch. The stock is expected to trade under the symbol RTSN on Nasdaq.
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Tracking the Deals: Upcoming California IPOs
A look at initial public stock offerings planned by California companies. For more information on upcoming deals, contact the companies or the underwriters. Note: Most of the companies and underwriters have Web sites.
Company: Paymap
Ticker symbol: PMAP
City: S.F.
Industry: Elec. payments
Size, in millions: $ 50
Est. share price: $11-13
Underwriter: D. Lufkin
Est. week: 9/11
*
Company: MarketFirst
Ticker symbol: MKTF
City: Mt. View
Industry: Interac. Mkting
Size, in millions: 40
Est. share price: 7-9
Underwriter: D. Lufkin
Est. week: 9/18
*
Company: CoSine Comm.
Ticker symbol: COSN
City: Rdwd City
Industry: Communications
Size, in millions: 140
Est. share price: 13-15
Underwriter: G. Sachs
Est. week: 9/25
*
Company: Docent
Ticker symbol: DCNT
City: Mt. View
Industry: Ed. content
Size, in millions: 81
Est. share price: 8-10
Underwriter: Deut. Banc
Est. week: 10/2
*
Company: Artisan Ent.
Ticker symbol: RTSN
City: S. Monica
Industry: Movies
Size, in millions: 102
Est. share price: 16-18
Underwriter: M. Lynch
Est. week: 11/6
*
Company: Future Media
Ticker symbol: FMPI
City: Valencia
Industry: DVD, CD makers
Size, in millions: 70
Est. share price: 12-15
Underwriter: Prud. Volpe
Est. week: NA
*
Company: InternetConn.
Ticker symbol: INCN
City: M del Rey
Industry: Networking
Size, in millions: NA
Est. share price: NA
Underwriter: M. Stanley
Est. week: NA
*
Company: Ixia
Ticker symbol: XXIA
City: Calabasas
Industry: Networking systems
Size, in millions: 58
Est. share price: NA
Underwriter: M. Lynch
Est. week: NA
*
Company: Kinzan
Ticker symbol: KNZN
City: Carlsbad
Industry: Business services
Size, in millions: 50
Est. share price: 10-15
Underwriter: Chase H&Q;
Est. week: NA
*
Company: Simple Tech.
Ticker symbol: STEC
City: Santa Ana
Industry: Memory products
Size, in millions: 70
Est. share price: 10-12
Underwriter: Lehman Bros.
Est. week: NA
*
NA = not available
Source: IPO Financial Network (https://www.ipofinancial.com) *
Times wire services were used in compiling this report. Remember that initial public offerings are highly speculative and not suitable for all investors. Debora Vrana, who covers investment banking and the securities industry for The Times, can be reached at debora.vrana@latimes.com or Business Section, Los Angeles Times, 202 W. 1st St., Los Angeles, CA 90012.
