NEW YORK (CNNfn) - The new issues market bounced back to life Friday with the deal from StorageNetworks Inc., a data network storage provider, leading the way; shares of StorageNetworks gained 234 percent.|
Three other initial public offerings produced strong gains, with Exfo Electro-Optical Engineering Inc., a maker of fiber-optic tests, climbing 69 percent, Precise Software Solutions Ltd., a provider of performance management services, rising 50 percent, and Mobility Electronics Inc., a computer technology products maker, advancing 9.4 percent.
Russian cellular provider Mobile Telesystems Ojsc. moved up 4 percent, while Netease.com Inc., a Chinese language portal in China, quickly produced the day's first dismal performance by dropping below its offer price.
For the week of June 26, the IPO market produced 18 deals that raised $4.2 billion, the strongest week since April, according to data from CommScan, a New York-based investment banking research firm. The largest deal, Genuity Inc. (GENU: Research, Estimates), raised $1.9 billion.
"This is the first week we've seen significant gains," said IPO and Internet analyst Sara Chang, of 123Jump.com, a financial and technology news and trend analysis site. "Definitely the market is looking up but you should never speak to soon."
The need for online storage
StorageNetworks rose 63-1/4 to 90-1/4, after raising $243 million on Thursday. The stock hit an intraday high of 102, but a late bout of profit taking cut into its gains. The company priced 9 million shares at $27 each, above its expected range, through underwriters led by Goldman Sachs. Price talk was nine million shares at $23-to-$25 each, up from the originally filed $17-to-$19 a share.
StorageNetworks will not be able to sustain its strong gain, said analyst George Nichols, of Morningstar.com, an equity analysis Web site. Nichols valued the company at $8.5 billion, or 460 times annualized sales.
"They have tons of losses and that's why I don't think they should be valued this highly," Nichols said. "They're building out their data centers to store information and are spending so much to fill out their facilities."
Waltham, Mass.-based StorageNetworks (STOR: Research, Estimates) lets customers connect their computer systems to the company's global data storage network. StorageNetworks stores and manages data for customers, provides taped backup of data, and real-time copies of data at remote sites.
StorageNetworks is building a dedicated fiber optic network that will connect its "storage points of presence" data centers within cities. Each center will contain both disk and tape storage devices and each data storage center will have 100,000 gigabytes of online disk storage.
So far, StorageNetworks has opened 36 S-POP data centers in areas including Chicago, New York, Los Angeles and San Francisco. The company plans on opening 15 more data centers in areas, including Detroit, Austin, Texas, and Frankfurt, Germany.
On June 21, StorageNetworks received a letter from EMC Corp., a professional services subcontractor of StorageNetworks, alleging that it had misrepresented that EMC was an investor and misappropriated confidential information. StorageNetworks could not be reached for comment but said in a filing with the Securities and Exchange Commission that the claims are without merit.
StorageNetworks plans to use net proceeds from the initial public offering for general corporate purposes, including capital expenditures, to increase sales and marketing, and working capital.
StorageNetworks has a history of operating losses. In 1999, the company incurred $23.9 million in net losses and for the quarter ended March 31, reported $27 million in net losses. On March 31, StorageNetworks had an accumulated deficit of $51.5 million.
StorageNetworks has assembled a top list of customers including Credit Suisse First Boston, Juniper Networks, Merrill Lynch, BestBuy.com. StorageNetworks competes against storage hardware and software vendors including Compaq, EMC, StorageTek, Sun Microsystems Inc., and Veritas Software.
Fiber optic testing
Exfo Electro-Optical Engineering Inc. rose 17-7/8 to 43-7/8 after raising $182 million Thursday. Exfo Electro priced 7 million shares at $26, above its expected price range, through underwriters led by Merrill Lynch. The deal was boosted to 7 million shares at $23-to-$25 each, up from the originally filed 6 million shares at $20-to-$22 each.
Vanier, Quebec-based Exfo Electro-Optical Engineering Inc. (EXFO: Research, Estimates) designs and builds fiber-optic test, measurement and monitoring equipment for the telecommunications industry. Fiber optic systems use pulses of light along glass or plastic fiber to transmit data. Reflection, attenuation, and noise can all lead to degradation of the light pulses and lead to reduced signal quality and transmission performance.
The 15-year-old Exfo Electro provides test products that measure the degradation effects and help repair and diagnose problems for customers such as AT&T Corp., Bell Atlantic Corp., General Dynamics Corp., GTE Corp., Qwest Communications International Inc., and U S West Communications Inc.
The company plans to use net proceeds to repay debt, for working capital and other general corporate purposes, including potential strategic investments and acquisitions.
For the six months ended February 29, Exfo reported total operating expenses of $13.7 million on sales of $29.1 million compared to operating expenses of $8.2 million on sales of $18.7 million for the same time period in 1999.
Exfo competes against Agilent Technologies Inc., Newport Corp., Santec Corp., and Kingfisher International PTY Ltd.
After the IPO, Exfo Chairman and Chief Executive Germain Lamonde will hold a 99.8 percent stake.
Precise on target
Precise Software Solutions Ltd. climbed 8 to 24, after raising $68 million. Precise after pricing 4.25 million shares at $16 each, the top of the range, through underwriters led by Merrill Lynch.
Savyon, Israel-based Precise Software (PRSE: Research, Estimates) is a provider of business and e-business application performance management solutions for Oracle-based environments. Precise Software helps detect problems and performance slowdowns in the computer systems run by large companies.
The company plans to use net proceeds to expand its sales and distribution channels, invest in research and development activities and for working capital and general corporate purposes.
Customers include Chevron, General Electric Co., Qwest Communications, and Southwestern Bell.
Mobility Electronics Inc. inched up, rising 1 to 13. The company raised $48 million after pricing 4 million shares at $12 each, the midpoint of its range, through underwriters led by DB Alex. Brown.
Founded in May 1995, Scottsdale, Ariz.-based Mobility Electronics (MOBE: Research, Estimates) develops products for the portable computer market. The company's Split Bridge technology extends a computer's PCI bus — the path linking a computer's central processing unit to other devices such as modems and local area network -- to remote locations up to 15 feet away without any other software, Mobility Electronics said.
The company plans to use net proceeds for working capital and general corporate purposes, including repayment of debt, increased spending on sales and marketing, research and development, and potential acquisitions.
Customers include Acer, Compaq, Gateway, Hewlett-Packard, Toshiba and IBM.
For the quarter ended March 31, the company reported net losses of $2.9 million on net sales of $5 million compared to net losses of $3.7 million on net sales of $3.2 million for the same time period in 1999.
Mobile stays afloat, Netease.com falls
Two other international deals Friday produced tepid results. Mobile Telesystems Ojsc., a provider of cellular communications systems in Moscow, inched up 7/8 to 22-3/8.
Mobile Telesystems (MBT: Research, Estimates) priced 15 million shares at $21.50 each through underwriters led by DB Alex. Brown. Each ADS represents 20 shares.
Netease.com failed to follow the success of other Asia Internet deals, falling 2-7/8, or 19 percent, to 12-1/8.
"Business-to-business deals are not as interesting as they once were," said John Fitzgibbon Jr., editor of WorldFinanceNet.com.
Overseas deals, he said, are difficult for investors because companies outside the United States do not have to file with the Securities and Exchange Commission.
Netease.com (NTES: Research, Estimates), the latest IPO from Asia, raised $69.75 million. Netease.com priced 4.5 million American depositary receipts at $15.5 each, the mid-point of the range, through underwriters led by Merrill Lynch.
The Beijing-based company operates a Chinese language Web portal in China. Netease.com follows the footsteps of Hong Kong-based Chinadotcom Corp., an Internet portal offering content, community and commerce targeting Chinese language audiences. Chinadotcom (CHINA: Research, Estimates) went public in July, 1999, and hit a high of 78 on March 6, but has since dropped. On Friday, shares rose 57/64 to 20-7/16.