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Broadcom IPO soars
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April 17, 1998: 6:30 p.m. ET
Shares finish 123 percent over offering price; investors drawn by its Internet ties
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NEW YORK (CNNfn) - In yet another sign of investor euphoria with the Internet, shares of Broadcom Corp. soared nearly 200 percent in their initial public offering Friday before cooling off to a mere 123 percent gain by the market's close.
Broadcom (BRCM), which makes chips for high-speed data transmission over cable lines, priced its 3.5-million share offering at 24. Its shares climbed as high as 70, a staggering 192-percent increase, before closing up 29-5/8 to 53-5/8.
When the Irvine, Calif.-based company first filed to go public, it expected shares would sell in the range of $10 to $12 per share.
"It's phenomenal but it's not surprising," said Eileen Ohnell, an analyst at Renaissance IPO Fund. "There was a lot of publicity and interest surrounding their IPO. The company is in a hot area."
That hot area, of course, is the Internet. Broadcom -- one of the most talked about initial public offerings in recent weeks -- provides chips for cable set-top boxes, which enable Internet access via television sets.
In March, the company signed a deal with General Instrument Corp. to be the sole chip provider of GI's set-top boxes for the next four years. The company also supplies equipment to such technology giants as Bay Networks Inc., 3Com Corp. and Cisco Systems Inc.
"The Internet is hot, telecommunications is hot, the market is hot and you have the fairy dust of luck sprinkled into all of it that's resulted in this eruption today," John Fitzgibbon, editor of IPO Aftermarket, told CNNfn. (309K WAV) or (309K AIFF)
Ohnell said that unlike the Internet search engine companies that have seen their stocks skyrocket, Broadcom offers tangible products and sales figures that appeal to investors.
"They're appealing in this kind of growth area with Internet companies, but they have real sales and almost break-even earnings," she said. "They also have a number of products that offer slightly different solutions and are at different maturity levels."
Broadcom was profitable from its inception in 1991 to 1996, but lost $1.2 million, or 4 cents a share, in 1997 on $37 million in revenues.
Ohnell also said the company's focus - higher bandwidth for Internet access and data transmission - and its diversity of products also appeal to investors.
In addition to cable set-top boxes, Broadcom makes cable modems, high-speed networking products and digital broadcast satellites.
Broadcom's stunning debut still trails that of Yahoo! Inc. (YHOO), which went public in April 1996. Its shares finished the first day at 33, a 154-percent gain.
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