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IPOs return full throttle
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September 23, 2000: 7:00 a.m. ET
Nearly 30 deals on tap; biotech and networking issues seen leading
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NEW YORK (CNNfn) - Nasdaq's sputtering last week is not expected to dampen the performance of the IPO market, which many analysts expect to return full force this week led by a number of promising biotechnology and networking deals.
After making a relatively quiet return from its annual Labor Day hiatus last week, when eight IPOs raised an impressive $1.8 billion, the IPO market has 27 new issues on the calendar this week poised to raise approximately $3.3 billion, according to CommScan, a New York-based investment banking research firm.
This week also features the return of top underwriters, such as Goldman Sachs and Morgan Stanley, which took an extended Labor Day vacation.
Those underwriters are expected to begin the IPO market's fall session just as they left it, pushing hot biotech and networking deals, although analysts cautioned investor jitters in the broader market ultimately may influence them to delay some borderline deals if early-week IPOs get off to a shaky start.
"We've got well over 20 deals on calendar for this week," said Corey Ostman, co-chief executive of Alert-IPO.com. "It wouldn't surprise me if some of those spill over to the next week."
Biotech returns
Biotech deals, one of the IPO market's darlings before the long Labor Day break, are expected to make the biggest splash this week with three deals expected to begin trading. Of the group -- which includes Eden Bioscience Corp. and Genomica Corp. -- analysts expect Ciphergen Biosystems Inc. to produce the biggest return.
The company comes in the hot "proteomics" sector, which studies proteins and how they change during disease.
 Ciphergen, a biotech tools play, has developed an automated system that captures and analyzes proteins directly from biological materials such as blood, tissue and saliva, allowing researchers to look repeatedly at proteins in their diseased state and compare them to their normal state.
Unlike many biotech companies, Ciphergen has released its product, called the ProteinChip System, commercially and already boasts such customers such as Abbott Laboratories (ABT: Research, Estimates), Merck & Co. (MRK: Research, Estimates), Pfizer Pharmaceuticals, Johns Hopkins Medical School, the National Cancer Institute and Stanford University.
"This [system] is really important," said Angelish Kumar, biotech analyst of 123Jump.com. "If you have to keep running tests over and over again, you need something that is efficient."
The Palo Alto, Calif.-based company posted revenue of $3.6 million on net losses of $9.2 million for the six months ended June 30.
John Fitzgibbon, editor of WorldFinanceNet.com, said the Ciphergen IPO could double in its first day of trading.
"We haven't had a biotech deal in a while," he said. "The industry is quite hot and doing well."
Ciphergen plans to offer 5 million shares at $14 to $16 each via lead underwriters SG Cowen, which is known for bringing strong biotech deals. The company plans to trade under the Nasdaq symbol "CIPH."
Another networking deal
Analysts also expect the IPO from CoSine Communications Inc. to be a big winner, drawing on the continued success of the networking sector. CoSine provides the switches and software that let network services providers offer secure Internet services, said analyst George Nichols, of Morningstar.com.
The company has a strong customer list, including Qwest Communications (Q: Research, Estimates), but competes against powerhouses such as Nortel Networks Corp. (NT: Research, Estimates), Cisco Systems (CSCO: Research, Estimates) and Lucent Technologies (LU: Research, Estimates) in the network infrastructure market.
"CoSine is quickly establishing itself in a promising market," Nichols said.
CoSine is similar to the IPO from Sonus Networks (SONS: Research, Estimates), a provider of hardware and software products that let companies deliver voice services over packet-based networks, which doubled on its first day of trading in May.
Another promising sign is that CoSine's lead underwriter, Goldman Sachs, has already boosted the deal's price range twice -- a sure sign that Wall Street is interested, analysts said.
CoSine Communications plans to offer 10 million shares at $20 to $22 each via Goldman. The company had originally planned to sell 10 million at $13 to $15 each and that was raised to $15 to $17 and is now set for $20 to $22.
One possible drawback is that like many young companies in its sector, CoSine's losses far outweigh its annual sales. For the six months ended June 30, CoSine had revenue of $11.3 million on net losses of $57 million.
Still, Ben Holmes, president of IPOpros.com, anticipates the company will gain at least $3 on its first day of trading.
Corey Ostman, co-chief executive of Alert-IPO.com, said he expects even better returns, but cautioned that the large size of the deal should dampen any hopes of a moonshot.
"This will be something like a 30 to 40 percent jump," Ostman said. "It's a solid deal."
CoSine plans to trade under the Nasdaq symbol "COSN."
More wireless
AvantGo Inc. is also getting high marks from analysts. The San Mateo, Calif.-based company provides mobile infrastructure software and services allowing customers to access Internet-based content and applications on mobile phones and handheld devices.
AvantGo's software is available on PocketPCs made by Hewlett Packard (HWP: Research, Estimates), Compaq (CPQ: Research, Estimates), Casio and Symbol Technologies (SBL: Research, Estimates) that use Microsoft's Window CE operating system and the Palm III and Palm V products. AvantGo's software is not bundled with the popular Palm VII family of products but is compatible.
"Once you install AvantGo software on your Palm, you can sit on the train and look at The Wall Street Journal through your Palm," Holmes said. "This is a significant deal."
Holmes has a "buy and long-term hold" rating on the deal. "We think you should hold this thing forever," he said.
Analysts compared the IPO to the issue from OmniSky Corp. (OMNY: Research, Estimates), which went public last week and rose 47 percent in its debut.
AvantGo plans to offer 5.5 million shares at $9 to $11 each via underwriters led by Credit Suisse First Boston. The company plans to trade under the symbol "AVGO."
Hydril gets energized
Rising oil prices may not be good news for consumers, but analysts expect it will continue to give companies opening in the energy sector a good boost.
Analysts expect the offering from the Hydril Co., an energy tools company, to produce a respectable premium. The offering draws upon the recent success of Chiles Offshore LLC (COD: Research, Estimates), which made a successful market debut last week.
Houston, Texas-based Hydril Co. manufactures the tubes that are used in oil and gas drilling. The company also makes pressure control products, which control and contain fluid and gas pressure during drilling.
Unlike most IPOs, the 70-year-old company is a proven competitor in its field and has 13 manufacturing facilities all over the world and about 1,500 customers.
The company is also profitable, with net income of $6.7 million on revenues of $90.3 million for the six months ended June 30.
"Oil and gas deals are pretty stable IPOs," said Alert-IPO.com's Ostman. "We saw with Chiles Offshore that there is still quite a bit of interest in energy-related issues because of the high cost of oil right now."
Hydril plans to offer 7.5 million shares at $16 to $18 each via underwriters led by Salomon Smith Barney and Credit Suisse First Boston.
Hydril plans to trade under the Nasdaq symbol "HYDL."
A Dutch auction
Aristotle International Inc. should also receive attention this week, analysts said, although more for the novel way it is selling its shares than for the quality of its deal.
Washington, D.C.-based Aristotle International provides information, products and services to political campaigns and organizations. The company maintains a database of about 150 million U.S. registered voters that it has compiled over the past 10 years.
Aristotle will be selling its 2 million shares via a "Dutch auction," where potential investors set the terms of the deal by placing actual bids on the stock ahead of the offering date. During the subscription period, investors place their bids with members of the selling group for the number of shares they want and the price they are willing to pay.
When the subscription period ends, the managing underwriter tabulates the bids and re-offers the stock to the bidders at the highest price at which all shares are spoken for.
"The Dutch auction has been around a long time," Fitzgibbon said, referring to the process that is commonly used by the U.S. Treasury to sell securities. "But if you are looking for a moonshot forget it. It won't be there. There is no aftermarket demand because it has been satisfied in initial offering."
Dutch Auctions are meant to ensure an efficient marketplace "as opposed to the circus environment that predominates today," said Morningstar.com's Nichols.
Aristotle plans to offer 2 million shares at $10 to $14 each via underwriters led by W.R. Hambrecht. The company plans to trade under the symbol "VOTE." 
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