2HRS2GO: Western Multiplex is a wait-and-see story

At least the pop wasn't outrageously huge.

Wall Street's desire for all things wireless sought fulfillment in today's initial public offering of Western Multiplex (Nasdaq: WMUX). The name sounds better suited to a chain of cowboy movie theaters, but that hasn't deterred anyone: WMUX volume broke the 10.6 million share mark by mid-afternoon, making it the ninth most active stock on U.S. markets so far today.

Despite that surge of activity, Western Multiplex's price gains have been only modest. The IPO priced at 12, opened for public trading at 13 1/2 and rose to 15 3/8 with roughly two hours left in today's regular session.

IPOs generally see lower first day premiums these days, as flipping has receded with recent market corrections. And perhaps traders and investors are tempering their enthusiasm about Western Multiplex. After all, the company's future hinges on a product that hasn't even entered beta testing.

Western Multiplex has sold wireless systems since 1992, with a focus on back-end equipment that connects single points such as base stations (the "backhaul" portion of the line) or lets large businesses expand their private networks. The Lynx and Tsunami lines can run at speeds up to 45 Mbs, and Western Multiplex says its developing new high-end versions that can transmit triple digit megabit speeds.

But the company in March spent $6.4 million to buy a tiny outfit called Ubiquity Communications, which was developing "last mile" technology for offering high speed Internet access to businesses and offices. That's the foundation of Western Multiplex's growth strategy.

"We believe our future prospects are dependent on our ability to successfully enter the point-to-multipoint market," the company says in its IPO prospectus.

The appeal of wireless broadband access has always rested on claims of being cheaper to install than fixed wires while being just as fast and reliable. Western Multiplex makes the same claims for Ubiquity, but so far they're just that: claims.

The company has developed some Ubiquity-based prototypes for the U.S. Navy, but the product isn't scheduled to enter commercial beta testing until later this year and won't ship until next year at the earliest.

Anyone familiar with the history of technology introductions knows new products often ship late for one reason or another. Western Multplex is no exception.

"We have experienced delays in the past in introducing new products and product features, and we may experience delays in the development of our Ubiquity point-to-multipoint products that could prevent us from introducing these products on schedule," the company admits.

To be sure, that's in the prospectus Risk Factors, which always outline worst case scenarios almost to the point of silliness. But delays are always a real concern with any technology rollout, especially for new market entrant like Ubiquity.

Western Multiplex does have the advantage of experience in some segment of the wireless market. The company's largest customers last year included several prominent names: Alltel Group, AT&T Wireless (NYSE: AWE), Bell Atlantic and GTE (now combined as Verizon), Nextel Communications (Nasdaq: NXTL) and Voicestream Wireless (Nasdaq: VSTR), Western Wireless (Nasdaq: WWCI) and the Pacific Bell unit of SBC Communications (NYSE: SBC). One of those, Nextel, generated more than 5 percent of Western Multiplex's revenue in 1999.

Backhaul business has created a moderately profitable company, though it has gone into the red in recent years as it invested in new technology. In fact, roughly one quarter of the $81.7 million in proceeds from today's IPO will be used to repay term loans from Credit Suisse First Boston.

Western Multiplex's highest annual profit came in 1996, when the it earned $5.9 million.

It's not a great showing, but it's all IPO investors have so far. The rest remains far from being a Ubiquitous success. 22GO>