THE DAY AHEAD: Tech highfliers go to the well

COMMENTARY--The market for initial public offerings may be stagnant, but the market for secondary stock and debt offerings sure is heating up.

In recent days, many tech highfliers have floated more debt and stock offerings in a move to fill up their coffers. These offerings haven't exactly been chump change either.

Ciena (Nasdaq: CIEN), a fiber-optic equipment company, raised $1.5 billion last week by floating 11 million shares in a secondary offering and offering $600 million in convertible notes. A convertible bond is a hybrid security that usually offers current income, and can be converted into company stock.

Web hosting firm Exodus (Nasdaq: EXDS) raised roughly $800 million in a secondary and convertible debt offering.

And those companies aren't alone. Adelphia Communications (Nasdaq: ADLAC), XO Communications (Nasdaq: XOXO) and Intuit (Nasdaq: INTU) have also either raised cash or announced plans to float securities.

Telecom giant Qwest Communications (NYSE: Q) is also calling about $1.1 billion of its bonds, but plans to offer another $3 billion in debt. Qwest is taking advantage of lower interest rates following the Federal Reserve's recent penchant for cutting rates.

Even if you discount the Fed-inspired euphoria, the recent funding activity shows that quality companies can still raise cash despite a rocky market. Even telecommunications companies, which have been constrained because they haven't been able to raise cash, are starting to raise dollars again. The activity represents "the beginning of a resurgence in that sector," said Morgan Stanley bond analyst Anand Iyer.

Tech companies are raising money now because in the end cash is king. These opportunistic companies also realize that start-ups can't raise cash with a skeptical IPO market.

Ciena said the net proceeds from its offerings will be used to fund operations and the vague "general corporate purposes," including working capital, capital expenditures and potential acquisitions. That last point may be the most notable. Ciena, armed with a strong balance sheet, can acquire start-ups as a way to get new technologies.

Exodus cited expansion plans in Europe as a reason to go to the funding well, but there's another point to consider. With the outlook for Exodus uncertain as its dot-com customers struggle, the company figured it would make a lot of sense to strike now and be self-sufficient.

UBS Warburg analyst John Hodulik said in a research note that the Exodus offering should be just enough to fund the company's business plan through to real profitability. Although First Call Corp. expects the company to report an operating profit in the first quarter of 2002, Exodus won't break even on net income--earnings including interest, taxes, depreciation and amortization--until 2003, according to Hodulik's projections.

Coming up

Although the week will be dominated by Federal Reserve chatter and earnings from Dell, Applied Materials and Hewlett-Packard, there are a few other companies worth watching.

InfoSpace (Nasdaq: INSP) will give its outlook for 2001 after the bell today. The company has exited its consumer business, cut employees and switched top execs. As a result, the stock has been volatile. The company's outlook isn't expected to be that great, but it's worth watching anyway.

On Tuesday, Sycamore Networks (Nasdaq: SCMR) will report its second-quarter results. The company is expected to post a profit of a nickel a share, but most folks will be much more worried about the outlook for the rest of the year. Revenue should be about $133 million, according to First Call.

On Thursday, Priceline.com (Nasdaq: PCLN) may start its long road to recovery -- or it may not. The company is expected to post a fourth-quarter loss of 7 cents a share. Far more important to the market will be earnings from Ciena. This fiber-optic player will report its first quarter results. Analysts are expecting a profit of 15 cents a share on sales of $315 million. Look for the company's outlook, especially since Cisco Systems warned of flat revenue for the next two quarters.TDAIN

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