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IPO Update: NetSilicon makes strong debut

NetSilicon Inc. (Nasdaq: NSIL) made its long-awaited market debut Wednesday, closing up 5 3/8, or 77 percent, to 12 3/8. After pricing at $7 a share, the stock surged to a high of 15 1/8 shortly after hitting the trading floor.

The company offered 5.25 million shares and priced below the price range of $8 to $10 a share.

The designer of single chip embedded networking systems was most recently slated to debut in mid-August, but its IPO has been through several transformations before that. Such a long delay has led some to wonder if there's something fishy about the offering.

The current offering is lead by underwriter CIBC World Markets, with USB Piper Jaffray acting as a co-manager. The company has been through a few underwriters. Back in March the Waltham, Mass.-based company increased its offering to 3 million shares from 2.9 million. NetSilicon then had a price range of $12 to $14 per share, up from the original $5, and had secured Dain Rauscher as the lead underwriter. In May, the price range was trimmed to $10 to $12 per share, and Tucker Anthony stepped in to underwrite the offering.

NetSilicon's parent company, Osicom Technologies, (Nasdaq: FIBR) makes integrated networking and bandwidth aggregation products. Of the total shares, NetSilicon will offer 3 million and Osicom will sell the balance. After the offering, Osicom will own approximately 53.4 percent of NetSilicon. NetSilicon owes Osicom about $3.8 million, and has other debt around $2.5 million.

Despite NetSilicon's delayed offering, the company turned a profit in the last period on record, and offers a tangible product. It earned $736,000 during the six-month period ending July 31, after losing $112,000 during the same period last year. Its chips and software that enable remote control of everything from fax machines to laser printers have some calling NetSilicon the 3Com Corporation (Nasdaq: COMS) of embedded systems.

Risks cited in the regulatory filings include the company's dependence on international sales, which made up 51 percent of net sales for the fiscal 1999 year. Sales were concentrated in Japan where resellers distribute their goods throughout Asia, and could thus be affected by economic changes. The company also has a limited number of domestic resellers, the company filings said.