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Alteon rockets up 294 percent in first trading day

Alteon WebSystems Inc. (Nasdaq: ATON) stormed up 55 15/16, or 294 percent, to 74 15/16 in its initial public offering Friday. After pricing at $19 a share, the stock moved as high as $81 a share in early trading.

Alteon's 4 million shares priced at the top of its estimated range Thursday.

Lead underwriter for the deal is Lehman Brothers, with Robertson Stephens and Thomas Weisel acting as co-managers. Alteon upped its offering after originally planning to put out 3.0 million shares in a $14 to $16 dollar price range.

Alteon, which makes switches, server adapters, and software for managing Web traffic, provides what it calls "Web-working" to e-commerce companies, Web portals, and content publishers. Its customers include Compaq Computer Corporation, Frontier GlobalCenter, Hewlett-Packard Company, and IBM Corporation, among others.

The company had a net loss of $12.7 million on revenue of $26.2 million for the fiscal 1999 year, compared to loss of $11.1 million on revenue of $13.6 million for 1998. As of June 30, Alteon had an accumulated deficit of $31.4 million.

Risks cited in the company's filings include the possibility its Alteon 700 Series of Web switches may not be launched "in a timely manner." The company said it has had problems shipping on time in the past, and may be hindered by their inexperience in manufacturing the new web switches, which it has so far only made a few of for customer testing purposes.

Alteon also faces competition from Cisco, which it believes plans to introduce some products that may compete with Alteon's, and may adopt an aggressive pricing policy to gain market share.

A relatively small number of the company's customers account for a significant portion of sales, Alteon also warned. In fiscal 1999, sales to 3Com accounted for 14 percent of net sales, while sales to IBM and Hewlett-Packard accounted for another 10 percent each of net sales. Over the last three years, the company has watched revenue from its biggest customer decline; sales to Sun Microsystems went down from 49 percent of net sales in fiscal 1997, to just 6 percent of net sales in 1999.