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Tech Industry

First half IPO favorites and flops

It's halftime for 2000 initial public offerings, and it has been one choppy year so far. If you bet on an e-commerce infrastructure or networking company, you're counting your cash. If you picked one of those dot-com IPOs, you're about a year too late and more than a few bucks short.

Despite plenty of Nasdaq volatility, there were a few tech companies posting stellar IPO returns, according to Renaissance Capital, an IPO research firm.

Nine of the top 10 IPOs entering July were communications companies -- either fiber optic or networking firms. The lone gainer that had nothing to do with fiber optics was webMethods (Nasdaq: WEBM), which is an e-commerce infrastructure software company that uses XML.

As for the losers, all shared common characteristics -- no revenue, no profit prospects and no first mover advantage. Many of the losers had a "been there, done that" ring to them. Here's a look at some of the winners and losers through June 30 and how they got there:

Winners

  • Sonus Networks (Nasdaq: SONS): Lack of a track record didn't hurt Sonus, which gained more than 586 percent from its offering price of $23. For the quarter ending March 31, revenue was just $1.1 million with a loss of $16 million. Sonus also competes with Cisco (Nasdaq: CSCO), Nortel (NYSE: NT) and Tellabs (Nasdaq: TLAB). Despite heady competition, investors were willing to take a chance because Sonus plays in a hot market. The company makes switches, management software and signaling gateways to deliver voice over data networks.

    1st half IPO Winners
    Ticker IPO price 6/30/00 Change
    SONS 23 157.88 586%
    TSTN 29 165.67 471%
    NUAN 17 83.31 390%
    ONIS 25 117 369%
    WEBM 35 157 349%
    NUFO 20 82.13 310.6%
    ARPT 34 132.81 290.6%
    MRVL 15 57 280%
    BKHM 15.83 59.25 274%
    CTLM 19 69 263%
    SMDI 12 43.22 262%
    **Prices as of 6/30. Source: Renaissance Capital
    Top Losers
    Ticker IPO Price 6/30/00 Change
    VSTY 10 1.44 -85.6%
    HGAT 11 1.63 -85.2%
    VMDC 12 1.81 -84.9%
    IMPV 16 2.5 -84.4%
    IPET 11 2.25 -79.5%
    FRGO 15 3.56 -76.2%
    SDAY 14.72 3.5 -76.2%
    BTBC 10 2.56 -74.4%
    ARTD 12 3.13 -74%
    IASIA 14 3.81 -72.8%

  • ONI Systems (Nasdaq: ONIS): The company makes equipment, operating software and protocols to help roll out fiber optic networks. Here's the recipe for a hot IPO these days: Mention fiber optics, garner just one or two big customers and cash in. ONI went public June 1 at $25 and is up more than 368 percent. ONI, however, doesn't win any originality points. Fiber optics player New Focus (Nasdaq: NUFO) used the same formula for a gain of nearly 310 percent.

  • Anything infrastructure: Networking companies were also hot. Turnstone Systems (Nasdaq: TSTN) turned some heads with a gain of 471 percent or so from its Feb. 1 IPO price of $29. Quantum Effect Devices (Nasdaq: QEDI), which makes networking chips, went public the same day as Turnstone and had similar results, up about 256 percent. Only webMethods broke the networking and communications trend. It used the buzz around XML for a big gain of 349 percent.

    Losers

  • Varsity Group/VarsityBooks.com (Nasdaq: VSTY): Here's an original idea: Let's sell books online. Not just any books. Text books. Not thrilled? Neither was Wall Street. VarsityBooks went public Valentine's Day but couldn't find any love. It went public at $10 and now if shares hit $2 it's a great gain. The company ditched the dot-com and became Varsity Group.

  • VantageMed (Nasdaq: VMDC) and HealthGate Data (Nasdaq: HGAT): These two high-tech health companies went public just as Drkoop.com (Nasdaq: KOOP) and Healtheon/WebMD (Nasdaq: HLTH) shares went on the critical list. Both are down about 85 percent from their initial prices.

  • Pets.com (Nasdaq: IPET): Nice puppet, but a dog of a stock. Pets.com went public Feb. 10, just a few days before profits started to matter for dot-coms. That's a shame because neither Pets.com, nor its sock puppet mascot, could find any.

  • EMachines (Nasdaq: EEEE): EMachines stands out on the IPO loser lists. The company has actually reported a profit before. The problem? It may never see profits again. The cheap PC vendor recently issued a profit warning and sees big losses ahead. The company did have a novel excuse -- it blamed Fed chief Alan Greenspan and his move to slow the economy for a demand lull. EMachines is down more than 70 percent from its IPO price of $9.TDAIN


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