Handspring jumps in debut
Palm competitor's IPO up 35 percent on first day; China Unicom also strong
NEW YORK (CNNfn) - Investors, starved for new signs of life in a sluggish initial public offering market, snapped up shares of two highly anticipated new offerings Wednesday, sending both to double-digit percentage gains.|
China Unicom Ltd., the ninth-largest IPO in history and largest ever to emerge from Asia, climbed 10 percent in trading on the New York Stock Exchange, while Handspring Inc., a provider of handheld electronic organizers, jumped nearly 35 percent in its first day.
Mountain View, Calif.-based Handspring (HAND: Research, Estimates) rose 6-15/16 to 26-15/16 after pricing 10 million shares at $20 each, a muted reaction from investors compared with the powerful debut of rival Palm Inc. (PALM: Research, Estimates).
Palm, the world's top maker of handheld computers, rose 150 percent in March after raising $874 million by pricing 23 million shares at $38 each. However, shares for the Santa Clara, Calif.-based company are currently trading below their offer price at 27-3/4.
Handspring and Palm intertwined
Handspring (HAND: Research, Estimates) raised about $200 million in a deal led by Credit Suisse First Boston. The deal's price range was cut to $17-to-$19 per share, down from the originally filed $19-to-$22.
"The market for handheld devices is really excellent," said analyst Paul Sagawa, of Sanford Bernstein, who noted Palm shares are rebounding. "Palm can sell everything it makes."
Handspring's first product is the Visor handheld computer, a personal organizer that is enhanced by an open expansion slot - its "Springboard Platform." The enhancement adds extra capabilities that allow the device to be used as everything from a digital camera to an MP3 player, Sagawa said.
Handspring's origins are intertwined with its competitor. Jeff Hawkins, Handspring's chief product officer, and Donna Dubinsky, Handspring's chief executive, invented the original Palm Pilot. The two-year old company also licenses the Palm operating system that allows it to run Palm programs.
"Handspring is not only a competitor but a customer," Sagawa said. "Every Handspring device that gets sold there is a payment to Palm."
Handspring plans to use net proceeds for general corporate purposes, including sales and marketing expenses and working capital.
For the nine months ended April 1, 2000, Handspring reported net losses of $41.1 million on revenue of $50.1 million.
Competitors include Palm and other companies that license the Palm operating system including Nokia, Sony and Qualcomm.
After the IPO, Hawkins will hold a 32.7 percent stake, while Dubinsky will have 17.6 percent. L. John Doerr, a general partner with venture capital firm Kleiner Perkins Caufield & Byers, will own 15 percent.
The Asian tiger
Meanwhile, China Unicom rose 2-1/32 to 22. The Beijing-based company raised nearly $4.92 billion after pricing 234 million American depositary receipts (ADRs) and 123 million common shares in Hong Kong. The ADRs, each of which represent 10 ordinary shares, were priced at $19.99 each in a sale led by underwriter Morgan Stanley Dean Witter.
China Unicom's success signals that the IPO market may be coming back to life, said David Menlow, president of IPOfinancial.com.
"To put out about 250 million shares in this market place and open two points higher and rise is an incredibly strong statement about the IPO market, the China market and Morgan Stanley," he said.
Menlow predicted there will be some strong debuts in the new issues market, particularly with the IPO from Handspring Inc.
"We've been calling for the IPO market to slowly dig itself out, and China Unicom puts muscle behind this statement," Menlow said.
China Unicom's deal also is the largest IPO from Asia, according to CommScan, a New York-based investment banking research firm. The deal tops an earlier float by rival China Telecom that raised $3.9 billion in 1997.
Italy's Enel Societa per Azioni's $16.5 billion offering last October still ranks as the largest offering ever.
More than just telephones
China Unicom (CHU: Research, Estimates), the second-largest telecom provider in China, offers a wide range of telecom services including cellular, paging, long-distance, data and Internet services. China Unicom's only substantial competitor in the country is China Telecom (CHL: Research, Estimates), the dominant wireless provider in China, analysts said. In 1999, China Telecom revenue climbed 47 percent to $4.7 billion.
China Unicom plans to use net proceeds to build out its cellular, long- distance and data networks as well as fiber optic transmission. For the year ended Dec. 31, 1999, the company reported net income of $89 million on revenue of $2 billion.
Cepheid climbs 50 percent
While Handspring and China Unicom rose solidly, Cepheid Inc. managed to produce an even stronger pop, climbing 50 percent or 3 points to 9 in its market debut.
The Sunnyvale, Calif.-based company raised $30 million after pricing 5 million shares at $6 each through underwriters led by UBS Warburg. Cepheid's deal was cut to 5 million shares at $7 to $8 a share from the originally filed 5 million at $10 to $12 each.
Cepheid (CPHD: Research, Estimates) makes microfluidic systems that automate and speed biological testing.