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IPO market gets ready for diversity

With optical and semiconductor deals taking most of the limelight on a very small stage during the past two months, offerings from other tech sectors will provide some mix next week.

Diversity is expected to hit the tech initial public offering market next week.

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IPO forecast
Phil Sanderson, Walden VC and Ira Ehrenpreis, Technology Partners
With optical and semiconductor deals taking most of the limelight on a very small stage during the past two months, offerings from other tech sectors will provide some mix.

Among the deals on the calendar are Novatel Wireless, interactive television player iMagicTV, Catalog.com and Carpartsonsale.com, marking four of nine deals that are expected to raise a total of $1 billion.

"Optical and chip deals have been the only ones to move lately. So it's interesting to see some other sectors on the calendar next week," said Dan McCarthy, market analyst with IPO.com.

If next week is anything like this week, investors can expect mixed results.

A 26 percent slump in the Nasdaq composite index since Sept. 1 has severely reduced investor demand for IPOs; about 40 companies have canceled IPO plans in the past few weeks. However, a few companies were able to launch their offerings this week, with one more than doubling in price on its first day of trading.

Shares of Santa Clara, Calif.-based Transmeta climbed 115 percent to $45.25 in their first day of trading Tuesday. They have since slipped to about $40.

Investor demand for the shares was high even before public trading began: The company initially hoped to sell its shares to institutional investors for $11 to $13, but the shares sold for an initial price of $21. Transmeta's IPO accounted for roughly 30 percent of the $750 million raised this week among six deals.

Transmeta designs microprocessors for notebooks and Internet devices that consume less power than competing processors from Intel and Advanced Micro Devices. So far, companies that plan to incorporate the company's so-called Crusoe chip into their products include Sony, NEC, Fujitsu, Gateway and Hitachi.

That customer list, and optimism about the company's prospects, clearly helped investors ignore the company's financial results: Since it was founded in 1995, Transmeta lost $148 million, including $71 million for the first nine months of 2000, according to documents filed with the Securities and Exchange Commission.

On Friday, the Tune in to CNET News.com TV's IPO
Forecast shares of Computer Access Technology jumped 34 percent in first-day trading. After pricing Thursday at $12, the shares were trading around $16 late Friday. The company makes products for linking computers together.

Robertson Stephens handled Computer Access's IPO, which raised $42 million through the sale of 3.5 million shares at $12.

However, shares of Luminent, a unit of MRV Communications, on Friday dipped slightly below their initial price of $12. The company makes lasers, transmitters and other components used in fiber-optic telecommunications networks.

Credit Suisse First Boston handled Luminent's sale of 12 million shares, which raised $144 million.

IPO potpourri
As for next week, Novatel's debut could be a little late as investor demand for wireless stocks has ebbed dramatically.

"I'm surprised to see Novatel on the calendar," McCarthy said. "Wireless has had it rough for most of the year, since AT&T came out with its wireless tracking stock and it didn't do anything."

Novatel, a wireless data modem and software provider based in San Diego, is hoping to raise upward of $84 million, based on the high end of its $10 to $12 pricing range and 7 million shares offered.

The company, which is expected to price its shares Wednesday and trade publicly under the ticker "NVTL" Thursday, generated revenues of $33.4 million during the first nine months this year--up from $5.5 million a year ago.

But more than half of those revenues came from three large customers. OmniSky is the company's largest customer, representing 32 percent of revenue during the first nine months. Novatel, however, is trying to renew OmniSky's contract, which expired in May, and is working under the old contract on a per-purchase-order basis.

Novatel posted a $30.3 million loss during the nine-month period ended Sept. 30, widening the gap from a $9.5 million loss a year earlier. The company had a negative cash flow of nearly $39 million during this period and has accumulated a deficit of $68.7 million since its formation.

iMagicTV, meanwhile, hopes to raise up to $61.8 million, based on the high end of its $11 to $13 pricing range and the 4.75 million shares being offered. The company expects to begin trading Thursday under the ticker "IMTV."

"iMagicTV is a technology that's part of an industry that's still up in the air," McCarthy said.

Interactive TV is a technology that has been hyped for years but has yet to be embraced by the mass market. But with the growth in broadband and rapid adoption of the Internet, some industry watchers believe the market is shifting.

iMagicTV generated revenues of $3.6 million during the six-month period ended Aug. 31, up from $216,000 a year ago. The company's loss widened to $5 million from $2.4 million the previous year.

Catalog.com, a Web hosting company based in Oklahoma City, plans a small offering.

The company hopes to raise up to $9 million, based on the high end of its $26 to $28 pricing range and 320,000 shares offered. The stock will trade under the ticker "CLG," and Institutional Equity is the underwriter.

Carpartsonsale.com, a Fort Worth, Texas, company that sells high-performance and specialty car parts, is underwriting its own deal. The company, which will trade under the ticker "CPOS," hopes to raise up to $11 million, based on the 2 million shares it plans to sell at $5.50.

IPOs have had a difficult year overall. Of the 426 new issues that have debuted in 2000, half are trading below their offer price, said Richard Peterson, an IPO analyst with Thomson Financial/Securities Data.

The 338 tech IPOs this year have fared no better. Fifty-two percent of those deals are underwater.