Networking firms may boost slumping IPO market
After a series of dismal weeks in the IPO market, networking firms that focus on the hot market for fiber optics are giving some life to Wall Street.
ONI Systems, a telecommunications company that builds optical networks, plans to offer 8 million shares next week to raise up to $184 million, based on the high end of its price range. The company yesterday raised its range to $22 to $24 per share from a range of $14 to $16.
Analysts say that the interest in fiber-optic
builders is a good sign that there may be some life yet in the market for public offerings. Just this week, optical equipment builder New Focus doubled in its market debut. The performance marked the first time in more than a month that an IPO managed to double its initial price on the first day of trading.
"We're starting to see investment bankers coming back to the markets with selective deals in fiber optics and semiconductors," IPO.com senior analyst Jeff Hirschkorn said.
ONI develops and markets communications networking equipment based on optical technology to metropolitan and regional networks. Formerly called Optical Networks, the company competes against networking companies such as Nortel Networks and Ciena, as well as a number of start-ups, such as Chromatis Networks, that are now entering the hot market.
Analysts say that ONI is well positioned, as there are still few large players to compete with. Yet that is expected to change soon, SG Cowen analyst Jim Kedersha explained.
"The market has started to move, but it hasn't exploded yet," he said.
During the three-month period ending March 31, ONI Systems generated revenues of $3.6 million, compared with $565,000 a year earlier. Net loss increased to $34.2 million for the period, compared with a loss of $4.8 million a year ago. The company will trade under the ticker "ONIS."
ONI is just one of 15 expected initial public offerings next week. Collectively, the group could raise up to $1.9 billion.
The recent slide of the tech-heavy Nasdaq composite index has weighed on companies planning public offerings and has resulted in a number postponing or canceling plans indefinitely. Two of nine deals were postponed this past week, while five priced below their expected range.
"For the past five weeks, we've had less than 10 deals a week," said Richard Peterson, IPO analyst with Thomson Financial/Securities Data.
Other companies scheduled to debut next week include Integrated Circuit Systems and Sonus Networks.
Sonus Networks plans to sell 5 million shares to raise $105 million, based on the high end of its $19 to $21 per share price range. Sonus makes hardware and software that helps businesses build high-capacity networks to carry voice and data traffic simultaneously.
Analysts say that Sonus could also benefit from investor interest in networking technology. "Sonus should do pretty well," Peterson said. "Their customers include companies like Global Crossing and Williams Communications."
Sonus had $1.1 million in sales for the three-month period ending March 31, compared to no sales figures a year ago. Net loss widened to $16 million from $4 million. The company will trade under the ticker "SONS."
Separately, Integrated Circuit Systems will offer 12.5 million shares to raise $212.5 million, based on the high end of its $15 to $17 per share pricing range. The company will trade under the ticker "ICST."
The company manufactures clock chips and mixed-signal integrated circuits that are used in both workstations and PCs, as well as network switches and set-top boxes. Integrated Circuit Systems posted pro-forma revenues of $78.9 million during the six-month period ending Jan. 1. Income from continuing operations was $18.1 million.