Handspring IPO on tap but may be dwarfed

The maker of handheld devices that use the popular Palm operating system may have trouble emerging from the shadow of two billion-dollar deals.

Dawn Kawamoto Former Staff writer, CNET News
Dawn Kawamoto covered enterprise security and financial news relating to technology for CNET News.
Dawn Kawamoto
4 min read
 IPOs on tap
Ticker: HAND
Business: Handheld devices
Web site: www.handspring.com
Lead underwriter:
  Credit Suisse First Boston
Pricing range: $17-$19
Recent Handspring news

Ticker: GENU
Business: Net infrastructure, e-commerce services
Web site: www.genuity.com
Lead underwriter:
  Morgan Stanley Dean Witter, Salomon Smith Barney
Pricing range: $12-$15
Recent GTE news

For more IPO information, see CNET Investor
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Handspring is expected to launch its IPO next week, but the maker of handheld devices that use the popular Palm operating system may have trouble emerging from the shadow of two billion-dollar deals.

China Unicom, the second-largest telecommunications company in China, and Genuity, a spinoff of telephone giant GTE, are scheduled to begin trading next week--marking the first time since the go-go market of last winter that two multibillion-dollar deals will debut in the same week.

Those two IPOs should absorb much of investors' attention and money, adding to some of the challenges already facing Handspring.

The company last month lowered its pricing range by nearly 14 percent to $17 to $19 a share. That move came as the markets plunged in April and its chief competitor, Palm, performed poorly after its own IPO.

Shares of Palm, maker of the PalmPilot and the OS that is used on the handheld devices, soared 150 percent on their first day of trading but today are trading nearly 32 percent below their IPO price of $38.

The crowded calendar could cause Handspring's underwriters to delay the offering,

"It's not unusual for some of the smaller deals to defer (their launch) and let the big deals get all the attention," said Richard Peterson, an IPO analyst with Thomson Financial Securities Data.

Other analysts said attention will not be diverted from Handspring because the shares will appeal to a different buyer than those looking to purchase China Unicom and Genuity.

"Institutional investors will be buying into Genuity and China Unicom, and a lot of retail investors will be buying Handspring," said Jeff Hirschkorn, senior analyst with IPO.com.

Hirschkorn added that although Handspring lowered its pricing range--typically an indication that demand is less than was expected--he finds the deal attractive given the awards and reception the Visor handheld has received in the market. Unlike the PalmPilot, the Visor allows people to upgrade with add-on modules.

Handspring seeks to raise up to $190 million based on the high end of its pricing range and 10 million shares it will offer. The shares will trade under the ticker "HAND," and Credit Suisse First Boston is the lead underwriter.

The company generated $50.1 million in revenues during the first nine months of fiscal 2000 and posted a loss of $40.8 million.

Handspring, along with Genuity and China Unicom, will be among 12 deals next week slated to raise a total of $8.5 billion. That's expected to break a 10-week dry spell, in which less than $1 billion a week has been raised by new issues, Thomson's Peterson said.

This week, six deals raised a mere $261 million, placing it second in terms of the smallest amount raised for the year. In early May, just $251 million was raised during the week of May 8.

Despite the downturn Tune in to CNET News.com TV's IPO Forecastin the Nasdaq since mid-March's record high, Hirschkorn said Wall Street can digest the two huge deals. Foreign distribution of China Unicom's shares, for example, will help the markets absorb both deals, he noted.

Shares in the two companies are not expected to soar in first-day trading, however, because of the large number of shares being sold, said Mary Lupo, an analyst with the IPO Plus Aftermarket Fund.

China Unicom shares were priced today, raising $4.9 billion for the second-largest telecommunications company in China. However, the American Depositary Receipts (ADRs) do not begin public trading until next Wednesday.

The company, which posted profits of $89 million on revenues of $2 billion last year, is being underwritten by Morgan Stanley Dean Witter and will trade under the ticker "CHU."

Genuity, a provider of Internet infrastructure and e-commerce services, is seeking to raise up to $2.6 billion based on the high end of its $12-$15 pricing range and the 173.9 million shares that will be sold. The offering is being underwritten by Morgan Stanley Dean Witter and Salomon Smith Barney, and the shares will trade under the ticker "GENU."

The company posted a $209.8 million loss on revenues of $247.9 million for the three-month period ended March 31.

"Genuity will be an attractive deal because it has an impressive network of 17,500 miles of cable and plans to add another 45 route miles by 2001," Lupo said. She added that the company's customer list is also noteworthy; it includes Microsoft, America Online and CNN, among others.