Tech Industry

McData triples in first-day trading

Shares of the switches and software maker jumps 206 percent in first-day trading, propelling the company to a market value of $9 billion.

Shares of McData tripled in first-day trading today, propelling the company to a market value of $9 billion and nearly making its founder the newest tech billionaire.

Shares of McData, a maker of switches and software used in storage area networks, opened at $74 and rose to $85.56 at the close of regular trading today, a jump of 206 percent from the IPO price of $28.

"There was an overwhelming demand," said Steven Tuen, a portfolio manager with the Kinetics Internet Fund. "I think the biggest plus for it is the EMC connection, being part of a very successful company and also being in an area where things are expected to grow very substantially."

McData, a subsidiary of computer storage giant EMC, raised $350 million yesterday by selling 12.5 million shares at $28 each, $2 above the expected $24 to $26 range. The company initially intended to sell its shares for $19 to $21.

At the closing price, the Broomfield, Colo.-based company had a market capitalization of $9.1 billion.

John F. McDonnell, McData's founder and CEO, owns 10.5 million shares of the company, according to a filing with the Securities and Exchange Commission. At $85.56 per share, his stake is worth about $900 million. McDonnell has served as the company's CEO since its inception in 1982.

Some portfolio managers said they were attracted to McData because other companies in the storage area network field have performed well. Shares of competitor Brocade Communications, for example, hit a 52-week high today of $219.75. The company's stock is up 135 percent for the year.

Demand for data storage services is on the rise. According to research firm International Data Corp., cited in McData's regulatory filing, multi-user disk storage grew from about 7,000 terabytes in 1993 to about 185,000 terabytes in 1999 and is expected to surpass 1.9 million terabytes in 2003. One terabyte equals 1 trillion bytes.

McData became profitable this year for the first time since 1996, earning $10.8 million for the six months that ended June 30 on revenue of $103.6 million. By comparison, the company lost $1.9 million on revenue of $34.1 million for the same period a year earlier.

In its filing, McData says it may use up to $12 million from the offering to acquire 90 acres of land in Broomfield, Colo., for a new corporate campus. The remaining money will go toward the repayment of debt, marketing and other corporate purposes.

McData trades on the Nasdaq under the ticker symbol "MCDT." Credit Suisse First Boston handled the deal.