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August Technology makes modest gains

August Technology (Nasdaq: AUGT), a company that offers automated visual testing equipment that detects defects in semiconductors, picked up 3 3/16 to 15 3/16 in its debut Wednesday.

The company had priced its IPO at $12, at the bottom of its $12-14 range.

Though the company is in a hot sector -- semiconductor testing equipment -- the markets have been less than welcoming to newcomers lately. Aside from bad timing, August has one other thing going against it. The deal's lead underwriter is Needham & Co, with Adams Harkness and A.G. Edwards acting as co-managers -- and that may be a problem.

"My biggest concern is the company's underwriter list," said Kenan Pollack of IPO Central. "When the market is skittish, the first handicap a company faces is its underwriter," he said, adding that he couldn't think of any significant tech deals Needham had underwritten before.

For the year ended Dec. 31, August had a net loss of $132,000 on revenue of $12.06 milllion, as opposed to no loss recorded in 1999 on revenue of $5.79 million. Although the company is still small, it projects strong growth due to big spending by semiconductor manufacturers.

The company derives most of its revenue from one product; its NSX systems accounted for 87 percent of revenues during the three months ended March 31, and 85 percent of revenue in 1999. The company sells its equipment to semiconductor manufacturers such as Motorola (NYSE: MOT) and via OEMs overseas, such as Quasys and Metron.

The company said it competes primarily with Semiconductor Technologies & Instruments, Inc., Robotic Vision Systems, Inc. (Nasdaq: ROBV), and Toray Industries, Inc. In addition, companies such as KLA-Tencor Corp (Nasdaq: KLAC) and Applied Materials Inc. (Nasdaq: AMAT) may enter August's market.

As of March 31, the company had working capital of $1.7 million, as compared to $2.5 million as of December 31, 1999.