Maxtor gives public trading a shot
The company wades into the public market despite an industry-wide slump in the storage sector.
The company began trading today at $7 per share on the Nasdaq Composite Index under the ticker symbol "MXTR." Formerly a subsidiary of Hyundai Electronics America, Maxtor issued 47.5 million shares of common stock--with 44.6 million shares outstanding--as part of its initial public offering announced in June. The company's net proceeds, after fees, came to about $313 million, according to investment bank Salomon Smith Barney, which served as lead manager on Maxtor's IPO.
The stock peaked at 7.25 for the day, but closed unchanged at 7, making the company's market capitalization worth more than $640 million. More than 14 million shares changed hands today.
According to documents filed with the Securities and Exchange Commission, Maxtor expected its shares to be priced between $8.50 and $10.50 per share.
"That says to me there was poor demand and they had to cut the price to make it attractive," said Richard Peterson, an analyst with Securities Data. "Historically, that's a bad sign for IPOs."
Peterson said that, aside from Broadcast.com's IPO, which more than tripled on the company's first day of trading, it is shaping up to be a "lackluster" year for initial public offerings.
He said that, like Maxtor, 16 of 47 IPOs this month have been priced below the desired range.
"This month has been particularly discouraging," said Michelle Rothacher, an analyst with Salomon Smith Barney. "Anything relative to hard drives or components would have had a hard time."
Maxtor's offering comes at a time when the entire storage sector is struggling, much like the semiconductor and memory markets. Pricing pressures due to an oversupply of drives, fierce competition by several well-funded companies, and demand for low-cost computers have combined to cut into profits. The Asian financial crisis hasn't helped any, either.
Unlike many of its peers in the storage sector, Maxtor posted a positive second-quarter earnings report, reporting net income of $5.4 million compared with a net loss of $46.6 million posted for the like quarter a year ago.
Earlier this month, Seagate Technology, the industry leader in storage, ousted its longtime chief Alan Shugart after the company posted significant losses.
Meanwhile Western Digital, one of the largest disk drive makers, this week posted a wider-than-expected loss.
Quantum, another major storage player, also reported sharply lower earnings this month.
Maxtor's IPO was comanaged by Hambrecht & Quist, Lehman Brothers, Merrill Lynch, and NationsBanc Montgomery Securities.