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NetGear raises $98 million in IPO

The networking-gear maker begins trading publicly after a second attempt at an initial public offering. NetGear ditched its first attempt in 2000 because of market conditions.

    Networking-technology maker NetGear raised $98 million in an initial public offering Thursday, posting a strong debut and contributing to some signs of life in the beleaguered initial public offering (IPO) market.

    NetGear's stock raced out of the gate, opening at $19.15 per share, or nearly 37 percent above its IPO price of $14 a share. The strong performance was not a surprise. The company raised the pricing range to $12 to $14 a share from $10 to $12 a share on Wednesday, according to a filing with the Securities and Exchange Commission.

    "All but one of the 17 (IPOs) this year had an opening price above their offer price," said Richard Peterson, an IPO analyst with Thomson Financial Services. Petersen added that "while the total number of IPO filings has not been robust this year, they are nonetheless picking up. We'll see some improvement in the third quarter and more in the fourth quarter."

    Last year, 57 companies went public.

    "If anyone thinks this is the second coming of the tech bubble, they're not even close," said David Menlow, president of IPO Financial Network, a research firm. "However, the average IPO deal is up, and IPO premiums for first day trading are up...so there is some value in the companies that are coming to market."

    Menlow added that only the profitable companies are the ones managing to launch an IPO. That was the case for NetGear.

    NetGear reported net revenue of $67.7 million for the quarter that ended March 31, compared with $45.5 million for the same period the previous year. The company posted a gross profit of $18.5 million for the quarter that ended March 31, an increase from $10.8 million in the year-ago period. Net income in the quarter that ended March 31 was $1.6 million, compared with $537,000 in the year-ago period.

    In the most recent quarter, which ended June 29, the company posted net revenue of $69 million, with gross profit of $19.1 million and income from operations of $3.3 million. The company did not give results for the comparable quarter in 2002.

    NetGear noted, however, that the numbers were unaudited results that may fluctuate once the figures are final.

    The company said it sold 7 million shares of its common stock at $14 a share--the top of the range of $12 to $14.

    According to the prospectus filed with the SEC on Thursday, NetGear will have about 27.22 million shares outstanding, giving the Santa Clara, Calif.-based company a market value of nearly $381 million.

    Lehman Brothers acted as the lead underwriter. Merrill Lynch and UBS Investment Bank acted as co-managers. NetGear gave the underwriters a 30-day option to purchase an additional 1.05 million shares at the IPO price to cover over-allotments, if any.

    This is NetGear's second try at an IPO. The company initially filed to go public in the fall of 2000 but postponed the offering due to market conditions.

    The company designs and markets networking products aimed at meeting the needs of small businesses and home users. NetGear was incorporated in 1996 as a subsidiary of Bay Networks, which was itself acquired by Nortel Networks in 1998. NetGear remained a subsidiary of Nortel until 2002 when Nortel sold its remaining interest in the company.

    NetGear, which trades under the ticker "NTGR," closed the regular trading session Thursday at $17.69, up 26.4 percent from its IPO price.