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MIPS stock off to sluggish start

The Silicon Graphics spin-off hits the public markets with an IPO at the high end of its price range but falters in late trading.

MIPS Technologies, a Silicon Graphics spin-off that designs chips for embedded products, hit the public markets today.

The company went public with an offering price of 14 a share, and raised a total of $77 million with 5.5 million shares floated.

MIPS originally was priced at the high end of its range of between 12 and 14, and opened at 15.125--an 8 percent increase. In later trading, however, the stock dipped below its target price, closing at 13.4375, down .5625 or 4 percent.

One analyst noted that June has been a sluggish month for IPOs, with the average first-day gain reaching only 8.3 percent.

"June deals have not been setting the world on fire," said Richard Peterson, a Securities Data analyst. He added that, of June's 57 IPOs, 12 closed their first days of trading below their offering prices.

"IPOs in June have been sloppy," he said, "so [MIPS's] numbers are in line with June's lagging performance."

By contrast, IPOs in April saw stellar gains of about 21 percent on their first days of trading, Peterson said. (Peterson is a Marketwise columnist for CNET NEWS.COM.)

MIPS, which owns 1.25 million shares of the shares floated, received $17.5 million of the proceeds from today's offering. SGI's 4.25 million shares brought it $59.5 million. SGI is MIPS's largest investor, with an 85.2 percent stake in the newly public company.

Underwriters for the IPO included Deutsche Morgan Grenfell, BancAmerica Robertson Stephens, and Hambrecht & Quist.

As previously reported, MIPS was planning to go public this week as part of SGI's restructuring plans. The company said last spring that it would shed non-core businesses and cut its workforce by 10 percent.

SGI is concentrating on servers and supercomputers aimed at six target markets: communications, energy, entertainment, government, manufacturing, and science. It also is planning to shift its microprocessor operations entirely to Intel down the road. (Intel is an investor in CNET: The Computer Network.)

In addition, MIPs is hoping to clinch a deal to provide microprocessors to Nintendo for its next-generation gaming platform, according to its regulatory filing with the Securities and Exchange Commission. During the second half of 1997, the company earned 76 percent of its revenues from supplying graphics and microprocessor chips for the Nintendo 64.