Tech Industry

Savvis gets flat reception

Savvis Communications Corp. (Nasdaq: SVVS) shares ended their first trading day unchanged following the company's initial public offering Tuesday. The company offered 17 million shares at $24 a piece.

Bridge Information Systems Inc., the parent of Savvis, will also become its largest customer.

The number of shares was increased from an original 12.7 million, and the company priced near the high end of its $22 to $25 range, signs of string demand.

Savvis, which provides data service networking services, including Internet access and securitiy services, will sell 14.875 million shares in its IPO. Bridge, the financial news company, will sell 2.125 million. Bridge acquired Savvis last April and has a 69 percent stake in Savvis.

For the nine months ended September 30, Savvis had a net loss of $51 million on revenue of $17.6 million. It also has a considerable debt to Bridge, which it plans to pay off following its initial public offering.

As part of the deal between the two companies, Savvis will acquire Bridge's Internet protocol network assets simultaneously with the IPO's closing. It also plans to use the IPO proceeds to pay Bridge the $63 million cash portion of the purchase price. A portion of the proceeds will also be used to pay a $58 million preferential distribution to Bridge and repay about $4 million of debt owed to Bridge, the company's SEC filing said.

Under the agreement, Bridge will also become Savvis' largest customer, with Bridge committed to purchase at least of $105 million of network services from it in 2000.

The company may see even wider losses ahead, since Bridge, which previously funded the company's operations, is no longer permitted to do so, the company said. After racking up $2.2 million, $14 million and $20 million in 1996, 1997 and 1998, and having negative cash flows from operating activities of $1.3 million, $10.5 million and $20.6 million in the corresponding years, Savvis doesn't expect profitability any time soon. The company said it expects net losses and negative cash flow from operating activities at least through 2002.

Savvis faces competition from backbone providers including AT&T (NYSE: T), Cable & Wireless (NYSE: CWZ), ICG Communications (Nasdaq: ICGX), Sprint Corporation (NYSE: FON) and MCI Worldcom (Nasdaq: WCOM).

There will be about 92.6 million Savvis shares outstanding after the IPO. In the case of heavy demand, an underwriting group led by Merrill Lynch and Morgan Stanley have an option to buy 2.55 million more Savvis shares.