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Market turmoil makes IPO future uncertain

The stock market plunge during the past few weeks creates havoc for companies that were planning to launch initial public offerings.

The plunge in the stock markets during the past few weeks has created havoc for companies that were planning to launch initial public offerings.

Last week, more than 25 percent of scheduled IPOs were delayed. This week, out of 24 deals scheduled, nearly a third were either postponed or withdrawn. Although 21 offerings are scheduled for next week, most IPO analysts expect many to meet a similar fate.

Security software maker Certicom and biotech company Rigel Pharmaceuticals canceled their IPO plans this week, while Web consultant Zefer, Internet marketing services company FloNetwork and services company Linuxcare were among the five IPOs to delay their debuts.

Other delayed deals include DrugAbuse Sciences and Adolor, which pushed back their IPOs for a second time.

Considering the market turmoil, it is perhaps more remarkable that 11 IPOs did launch this week, even though several priced below their initial ranges. Online training company Healthstream, services company DDi and Internet banking software company Corillian all priced below their expected ranges.

"The markets are definitely pessimistic at this point," said Randall Roth, an analyst with IPO Plus Aftermarket Fund. "But underwriters are still pushing more deals out, even though we have an excess supply of IPOs."

He added that the still-heavy supply makes it more difficult for investors to pick out quality deals, which hurts new issues overall.

Jeff Hirschkorn, senior analyst with IPO.com, said the weak IPO market is similar to that of the summer of 1998.

"We had a lot of deals that couldn't come out unless they were seasoned companies with brand names," Hirschkorn said.

That's the case with at least two deals on tap for next week.

AltaVista, a portal being spun off by CMGI, and 360networks, headed by former Microsoft chief financial officer Greg Maffei, are expected to debut next week.

Maffei's company hopes to Tune in to CNET News.com TV's IPO Forecast raise up to $828 million by selling 46 million shares, based on the high end of its $16 to $18 price range. The company, which is being underwritten by Goldman Sachs and Donaldson Lufkin & Jenrette, will trade under the ticker "TSIX."

Canadian-based 360networks is expected to garner investor interest because of Maffei's association and the strength of its business model; the company sells fiber-optic communications network products and services.

The company generated pro forma revenues of $386 million for the year ended Dec. 31 and posted a loss of $114.8 million.

AltaVista is pulling in mixed reviews from IPO analysts despite its brand name. The company is making its second attempt at an IPO; its first attempt, in 1997, was pulled amid a weak market and restructuring plans for its then owner, Digital Equipment.

"AltaVista has a brand name, a good model and is still growing," Hirschkorn said.

But David Menlow, president of IPO Financial Network, said his company is not impressed with the pending offering.

"It seems like once again, AltaVista has missed an opportunity in the market. This is an underwriting that is three-and-a-half years old, since the original filing was in 1996," Menlow said. "They are coming into a weak point in the market and at a time when portals are pretty much established."

AltaVista hopes to raise up to $296 million by selling 14.8 million shares between $18 and $20. The company is being underwritten by Morgan Stanley Dean Witter and will trade under the ticker "ALTA."

The portal generated revenues of $50.9 million for the three-month period ended Jan. 31 and posted a $272.2 million loss.