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New Focus takes off in debut

Fiber optic components maker New Focus (Nasdaq: NUFO) shot up 31, or 155 percent, to 51 in its initial public offering Thursday.

The company priced 5 million shares priced at $20, well above their $16 to 18 range. That was revised upward from its original $14 to 16 range.

Part of the company's strength lies in its optical networking products; fiber optics is a hot market, with demand for fiber optic components is estimated to top $22.5 billion by 2003, up from $6.6 billion in 1999, according to research firm Ryan, Hankin & Kent.

Though the company is a strong bet if it continues to grow on its own, it may also be a tantalizing acquisition target for big telecommunications equipment makers such as Nortel (NYSE: NT), Lucent (NYSE: LU) or Cisco (Nasdaq: CSCO), which have been snapping up fiber-optic companies.

New Focus' blue-chip client list includes Agilent Technologies (NYSE: A), Alcatel USA (NYSE: ALA), Avanex Corp. (Nasdaq: AVNX), Corning Inc. (NYSE: GLW), Corvis Corp., JDS Uniphase (Nasdaq; JDSU), Lucent and Nortel. No customer accounts for more than 10 percent of revenue, the company said in regulatory filings.

The company's losses accelerated as the company expanded. For the nine months ending Dec. 31, New Focus had sales of $18.1 million and a net loss of $7.67 million. For the three months ending March 31, the company reported sales of $9.7 million and a loss of $12.5 million.

New Focus' biggest challenge may be boosting manufacturing capacity. The company, said it will hire aggressively in the next couple quarters, and said it needs an additional 100,000 square feet in Northern California to facilitate growth over the next 12 months.

The company also faces competition, some of which is from clients. New Focus cites E-Tek, JDS Uniphase, Nortel and Lucent as competitors, and the latter three are also customers.

CS First Boston is the lead underwriter.


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