IPO Window Shuts Tighter

The market for initial public offerings has become even more inhospitable, as demonstrated by two recent IPO withdrawals from optical components vendors.

On Monday, Lucent Technologies Inc.-backed (NYSE: LU) WaveSplitter Technologies Inc. withdrew its IPO bid, citing market conditions. The offering could have raised up to $110 million for the optical component maker. WaveSplitter’s decision comes one working day after OMM Inc. withdrew its filing. OMM’s planned offering could have raised $99 million (see Tough Seas for New IPOs, OMM, and Wavesplitter Files for $155 Million IPO).

Also conceding the market's frostiness was Siemens AG (Frankfurt: SIE) CFO Heinz-Joachim Neubürger, who told reporters on Monday that Siemens may again delay its Unisphere Networks Inc. spinoff and IPO (see Unisphere Tunes Up for IPO). Neubürger didn’t reiterate the company’s previously stated June time period for a Unisphere IPO, according to a Reuters report.

Even those firms still in the hunt for an IPO have significantly lowered the size of their offerings. Tellium Inc. recently reduced the price range on its offering to $8-10 per share from $13-15, and its possible proceeds have fallen below $150 million from the more than $260 million first expected when it filed last year (see Tellium Lowers Its IPO Ambitions and Tellium Switches IPO Bankers).

Since Lucent optoelectronics spinoff Agere Systems filed for its offering in December, the company has changed its offering twice, having lowered its price range to $12-$14 from $15-$20 a share. “They look like they’ve got their hat in their hand at this point,” groused one banker whose firm was not involved in the offering (see Agere Aims for $8.5 Billion IPO and Agere Sets Pricing Date and Range).

The companies that have shelved their IPO plans say that the delayed offerings are "due to market conditions," and aren’t a poor reflection on their firms. “[The IPO withdrawal] has nothing to do with the health of our business," a WaveSplitter spokesperson says.

“The IPO window is definitely closed for a while,” explains Phil Chapman, OMM’s CFO. And with that realization, he says, OMM didn’t care to spend the time, money, and effort required to keep the firm in active registration while waiting for the telecom sector to stop tossing and turning.

“All other things being equal, people don’t like to be in active registration,” he says, noting the pain involved in keeping finances audited and posted, as well as cataloging every material event for the world to see.

Chapman also addressed speculation that something was afoot, since OMM had reserved a booth space at the upcoming OFC show and then decided not to exhibit. “We’ll be [at OFC] in force,” he explains, adding that OMM’s engineers were too busy with customers to build a show demo. “[Smaller] companies that don’t have customers will probably spend a lot of time getting the booth just right,” he says.

Booth or not, OMM does at least have some customers to keep happy. Its most recent SEC filing shows that as of September 30, 2000, it had sold products to 14 customers, including Cisco Systems Inc. (Nasdaq: CSCO), Corvis Corp. (Nasdaq: CORV), and others. Chapman says that number has since grown to around 30. The filing further notes that seven customers accounted for about 87 percent of OMM’s revenues for the nine months ended September 30, 2000.

“The companies that are burning lots of cash and have worn out their welcome with VCs will have to go public at fire sale prices,” says George Nichols, a stock analyst at Morningstar. “Those that have any brains should wait.”

-- Phil Harvey, senior editor, Light Reading http://www.lightreading.com