Advanced Switching gains 20 percent in IPO debut

2 min read

Advanced Switching Communications (Nasdaq: ASCX) closed its first day of public trading up 3 to 18, after pricing 6.3 million shares at $15, the top of its $13 to $15 range for trading Thursday.

The company makes products that enable telecommunications service providers to offer high speed, or broadband, services to end-users.

"These kind of infrastructure offerings have been strong," said Kenan Pollack of IPO Central, adding that infrastructure is one of the categories that may manage to escape the market doldrums in the PC and semiconductor categories.

Prior to 1999, Advanced Switching was a development stage company; it shipped its first product in March 1999. Like most young companies, it has racked up large debt. For the 6 months ended June 30, the company had a net loss of $9.09 million on revenue of $12.93 million, as opposed to a loss of $4.64 million on revenue of $402,000 for the same period in 1999. As of June 30, 2000 it had an accumulated deficit of $25.6 million.

Risks to investors include the company's dependence on a relatively small number of customers. For the year ended December 31, 1999, 2nd Century Communications and AccessLan accounted for 22 percent and 53 percent of revenue. They also accounted for 11 percent and 10 percent of revenue for the 6 months ended June 30, while Broadband Office accounted for 53 percent of revenue for that period.

Other risks include patent problems; the company said it its filings witht the SEC that it recently received a letter from Nortel Networks (NYSE: NT) alleging that one of its products infringes a Nortel patent relating to inverse multiplexing over ATM. The dispute could result in litigation, the company added.

Advanced Switching competes with large networking equipment companies such as Alcatel (NYSE: ALA), Cisco Systems (Nasdaq: CSCO), Lucent Technologies (NYSE: LU) and Nortel, as well as companies such as Accelerated Networks (Nasdaq: ACCL).
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