IPO Roundup: Manufacturer's Services and Qualstar gain in debut

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Manufacturer's Service (NYSE: MSV) gained 4 5/8 to 20 5/8 Friday after pricing shares at $16 a piece, in the middle of their lowered range of $15 to $17 a share. The contract manufacturer for electronics, telecom and medical equipment firms, had originally priced its 11 million shares at $17 to $19 a share.

Manufacturer's Service procures equipment and offers design and testing services to its customers. The company also oversees every aspect of production, from design and manufacturing to testing, packaging, and delivery.

"The commodity factor is a concern," said Kenan Pollack of Hoover's Online. The company competes against companies with a cheap labor pool overseas.

Half the company's sales come from IBM (NYSE: IBM) alone, which is also a concern, Pollack added. Its other customers include Iomega, (NYSE: IOM) which accounts for 14 percent of sales, 3Com (Nasdaq: COMS), Hewlett-Packard (NYSE: HWP), LSI Logic (NYSE: LSI), and Unisys (NYSE: UIS). Entities affiliated with Donaldson, Lufkin & Jenrette own about 90 percent of the company.

But the company turns a profit, which should make it a hot commodity on the IPO market. The company had an operating income of $16.4 million on sales of $920.7 million for the year ended December 31, as opposed to an income of $8.7 million on sales of $837.9 million in 1998.

By only bringing 11 percent of the company public, Manufacturer's Service is keeping the float artificially low, which should also help create demand, Pollack added.

Maufacturer's Services competitors include Benchmark Electronics, Plexus Corp. (Nasdaq: PLXS), Celestica Inc. (NYSE: CLS), Flextronics International Ltd., SCI (NYSE: SCI), Jabil Circuit (NYSE: JBL) and Solectron (NYSE: SLR). The company said in its SEC filings that as more original equipment manufacturers (OEMs) dispose of their manufacturing assets and increase their use of outsourcing, it will face increasing competition.

Lead underwriter for the deal is Donaldson Lufkin & Jenrette; co-managers are Banc of America and Robertson Stephens.

Among other IPOs Friday:

  • Qualstar Corp. (Nasdaq: QBAK) was up 1 1/16 to 8 1/8 after it priced 2.5 million shares at $7 each, at the bottom end of its expected price range of $7 to $9 per share, through lead underwriter Needham & Co.

    The company, which makes and sells automated magnetic tape libraries used to store, retrieve and manage electronic data, lowered its range from an originally proposed $10 to $12 a share.

    For 1999, the company's sales were $29.7 million. Unlike most companies going public, it also recorded a profit; net income for 1999 was $4 million, 106 percent growth over the previous year.

    Qaulstar's competitors include Advanced Digital Information (Nasdaq: ADIC) and Exabyte (Nasdaq: EXBT).

    The offering will leave about 12.1 million shares outstanding.

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