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OTG Software makes big splash

The storage management software vendor's shares surged up 37 3/16, or 196 percent, to 56 3/16 in its initial public offering.

OTG priced 4 million common shares at $19 each for trading Friday, well above their price range of $12 to 14 each.

"Online storage is always a dear area," said IPOfinancial.com's David Menlow, who the stock as one of his top picks for the week.

The deal, underwritten by Credit Suisse First Boston, will offer the public a 16.3 percent stake in the company.

Though the company has recorded a net loss for the past two years, its revenue growth has been strong. In 1999, OTG had a net loss of $1.5 million on revenue of $25.4 million, compared to a loss of $1.2 million on revenue of $17.3 million in 1998.

During 1999, sales of its XtenderSolutions products accounted for 72 percent of total revenues. The company cautioned in its regulatory filings that it may have trouble maintaining the current rate of revenue growth amid growing competition, and lower-than-expected market acceptance of Microsoft's (Nasdaq: MSFT) Windows NT and Windows 2000.

Many of OTG's customers could become competitors, it said. Veritas (Nasdaq: VRTS), Legato Systems (Nasdaq: LGTO), Computer Associates (NYSE: CA) and IBM (NYSE: IBM), who now use OTG's products to enhance their data back-up capabilities, may develop their own storage systems. Veritas has recently begun to offer a Windows NT-based product that competes with DiskXtender.

Microsoft may also develop competing products. Windows 2000 also includes basic data storage management.