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Cypress makes modest gain in debut

Cypress Communications Inc. (Nasdaq: CYCO) closed up 3 1/2, or 21 percent, to 20 1/2 in its initial public offering. Shares moved as high as 24 in early trading.

The company, which offers local and long distance voice, Web access, e-mail and other services to businesses in office buildings, priced its 10 million shares at $17 each, just above its range of $14 to 16 per share.

The Atlanta-based Cypress, which targets small and medium companies located in multi-tenant buildings, plans to use $100 million from the offering to construct more in-building networks and to buy communications equipment.

The company may perform similarly to Telaxis (Nasdaq: TLXS) which fared well in its IPO last week. Cypress's strength is its ability to build in the last mile for companies like Level 3 (Nasdaq: LVLT) that are building the fibre networks, said Kennan Pollock, an analyst for IPO Central. The company is a prime acquisition target, Pollock said.

The company's services are delivered over its own fiber optic, digital and broadband networks, which were available in 116 buildings in 12 major metropolitan areas at the end of December. Cypress has agreements with building owners and property managers giving it the right to install and operate in more than 730 buildings in 50 major markets.

The company said some competitors, such as Allied Riser Communications (Nasdaq: ARCC), Broadband Office and OnSite Access, are attempting to gain access to office buildings in its target markets. Cypress also faces competition from local telephone companies, including GTE (NYSE: GTE) and regional Bell operating companies

For the nine months ended September 30, the company had loss of $8.9 million on revenue of $5.2 million, compared to net loss of $2.7 million on revenue of $1.4 million for the same period in 1998.

If there were heavy demand for the 10 million shares, which represent a stake to the public of about 21.8 percent, then the underwriting group led by Bear Stearns, and co-managed by Donaldson Lufkin and J.C. Bradford would have an option to buy 1.5 million more shares.