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Market yawns at Concentric IPO

An off day for the markets means Concentric Networks' share price doesn't soar on first trade.

Concentric Network (CNCX) today left the IPO chute at a less exorbitant rate of speed than other recent high-flying technology offerings.

But just because the company didn't accelerate into the public realm at the same rate as @Home (ATHM) or Rambus (RMBS), doesn?t mean the it will fail as an IPO, said Richard Peterson, an analyst at Securities Data.

The market as a whole is having a off day. The Dow fell about 120 points in early trading and the Nasdaq was off 13. Futhermore, Peterson said, an IPO's progress 30 days after launch gives a better indication of the market's acceptance than does the first trade.

@Home's stock jumped over 130 percent on its first trade, and Rambus saw a 98 percent jump in its first trade.

Virtual private network provider Concentric saw its shares rise 33 percent on its first trade from its offering price of $12 a share, but has since drifted back to about 14. The company's pricing range was initially $10 to $12 a share, with 3 million shares proposed.

Concentric recently upped the number of shares offered to 4.3 million from its last increase of 3.6 million. The company, with 14.5 million shares outstanding, had a market value of $174 million based on its offering price.

The offering raised $51.6 million in capital, with which Concentric will expand its network and data center operations, fund operating losses, working capital, and address other general corporate purposes, according to the company's filing with the Securities and Exchange Commission. In addition, the company expects to use a portion of the proceeds to fund the repurchase of shares tendered in connection with rescission offers.

Concentric also announced a private placement of 1.5 million shares of common stock at a price of $12 per share to Williams Communications Group and Bay Networks (BAY). The company will receive approximately $18 million (including $3 million in cancellation of indebtedness) from the private placement, which is expected to take place on or about August 5.

The company told the SEC it had a net loss of $12.9 million, or $1.67 a share, for the quarter ended June 30, compared to a loss of $15.4 million, or $3.38 per share, a year earlier. Revenue grew to $10.8 million from $2.5 million for the same quarter last year.

The filing said the revenue growth was due to the company's broadened product offerings to its enterprise customers. Other contributors were the company's leveraged marketing arrangements with strategic partners and continued growth in revenues derived from Internet access customers.

The company warned in its filing that it derives a substantial portion of its total revenue from a single customer. For the quarter ending in March, revenue from WebTV Networks represented approximately 33 percent of the company's revenue, and the company's current agreement to provide services to WebTV expires on December 1, 1997.

"Although the company is negotiating a new agreement with [WebTV], there can be no assurance such negotiations will be successfully concluded," said the filing.

UBS Securities, Unterberg Harris, and Wheat, First Securities comanaged the offering.