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Tech Industry

IPO Update: AltiGen gains, XM Satellite radio struggles

AltiGen Communications Inc. (Nasdaq: ATGN) shot up 82 percent Tuesday in its IPO, after pricing 3.25 million shares at $10 each.

Shares were up 8 3/16 to 18 3/16 by Tuesday afternoon.

CIBC World Markets, Dain Rauscher Wessels and FAC/Equities were the underwriters. AltiGen has also granted the underwriters an option to purchase up to 487,500 additional shares of common stock.

AltiGen had $4.3 million in revenue for the nine months ended June 20, 1999, compared to $2.6 million for the same period in 1998. Net loss also grew this year; loss for 1999 was $5.2 million compared to $2.8 million for 1998.

AltiGen makes next generation, server-based telecommunications systems that allow businesses to use the Internet and the Public Switched Telephone Network, or PSTN, interchangeably.

Risks cited in the company's regulatory filings include the company's accumulated deficit of $15.1 million, as well as reliance on key distributors, Ingram Micro Inc. and Tech Data Corporation, which accounted for 45 percent of sales in the nine months ended June 30, 1999.

AltiGen is also caught up in litigation with NetPhone, Inc., which could prove "costly and time consuming." In June 1999, a letter from NetPhone alleged that AltiGen was infringing on a patent owned by NetPhone. NetPhone's motion and our cross-motion have not yet been decided.

AltiGen has a lot riding on the case. An adverse outcome could require AltiGen to us to obtain a license from NetPhone for lost revenue from what NetPhone calls its "Quantum device" - which accounted for 84 percent of AltiGen's revenue for the first nine months of 1999.

Other IPOs today.

  • XM Satellite Radio Holdings Inc. (Nasdaq: XMSR) was gasping for air Tuesday afternoon after modest gains slipped away, leaving the stock hovering at its offering price of $12. The company priced its 10 million shares at the bottom of their $12-13 range.

    The IPO of the Washington, D.C.-based audio entertainment and information programming is underwritten by Bear Sterns.

    XM Satellite has already raised about $330.8 million in financing from investors and strategic partners, including General Motors Corp.(NYSE:GM) and DIRECTV's parent American Mobile Satellite Corp. (Nasdaq: SKYC). Content partners include Bloomberg News Radio, Hispanic Broadcasting Corporation, USA Today and BBC World Service.

    The company has big plans, but has yet to bring in any revenue. XM lost $19.6 million last year, and has said it plans to start receiving revenue from operations by 2001, slightly ahead of its target of the second quarter of 2001.

    XM Radio will likely compete with CD Radio (Nasdaq: CDRD). Both firms hold the only two licenses from the Federal Communications Commission to build satellite radio networks

    Reuters contributed to this report.