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
KPSmells 12/4/2012 | 8:46:10 PM
re: IPO Window Shuts Tighter Watch out ! Last 12 months were part of the DOT Bomb era. Next 12 months will be OPTO Bomb Era !! Run for cover and Hide !!
jssreenath 12/4/2012 | 8:45:59 PM
re: IPO Window Shuts Tighter "Yeah, we (OMM) are waaaaaaaay too important for the biggest trade show in the optical fiber industry...we have customers, and all of the companies that are going to OFC don't have any, like Nortel, Corning, Lucent, Cisco, Juniper, Ciena, Sycamore, JDSU, etc...."
The real scoop is that they have little more than they did last year, and would be embarassed to show the same high loss, high priced, low port count switches.
figatree 12/4/2012 | 8:45:51 PM
re: IPO Window Shuts Tighter That does seem very arrogant for a company spokesperson to say that people who do have booths don't have customers or major priorties.
DCITDave 12/4/2012 | 8:45:49 PM
re: IPO Window Shuts Tighter It seems to me like all he was pointing out was that smaller firms don't have the engineering resources to handle customers and troll for customers by building a super booth.

The statement, however offensive to you personally, does seem to be true.
jssreenath 12/4/2012 | 8:45:40 PM
re: IPO Window Shuts Tighter Phil, thats not what he was saying at all, unless you took his quote out of context or you are covering for a friend after the fact. You may, however, be correct in saying that they can't handle customers and the booth preparation simultaneously but the quote in the article:
"WeGll be [at OFC] in force,Gǥ he explains, adding that OMMGs engineers were too busy with customers to build a show demo. Gǣ[Smaller] companies that donGt have customers will probably spend a lot of time getting the booth just right,Gǥ he says."
in no way suggests they meant what you wrote in your response to my posting. It says "We are obnoxious and obviously insecure about not showing at OFC so we will belittle those that do by touting that we have customers."
y2k 12/4/2012 | 8:45:02 PM
re: IPO Window Shuts Tighter I don't think OMM was arrogant or obnoxious. I think they were just being defensive.

The decision to pull out of OFC was made around the time that they decided to go IPO. If they had something new to show, OFC would have been the perfect opportunity to launch the IPO. If they didn't have anything to show, then surely they wouldn't want to come to OFC while they are selling stock.

Now that their IPO is off the table and they have to do a private round to sustain the burnrate for a company with 400 employees and selling only samples, they have no choice but to come to OFC "in force." If they don't come, that would be the beginning to the end. If they come and they have nothing more to show than 8x8 at high loss, it is also the beginning to the end. In another five days, we will know for sure.

I also don't think Lightreading was arrogant or obnoxious. I think they too were just being defensive.

They have selected OMM as #1 of the Top Ten Private Companies. In another five days, we will know if they made the right choice.

beetlebrow 12/4/2012 | 8:44:29 PM
re: IPO Window Shuts Tighter I notice Tellium doesn't have ads any more on the LR site. They better
wallpaper this site before their IPO. It will help.

soothaandi 12/4/2012 | 8:44:27 PM
re: IPO Window Shuts Tighter
Here's another view of the same subject. Was the OMM guy hinting that OMM might be displaying their wares thru their customers at OFC? While a smaller company with no customers would have to have their own booth and everything else.

Just a possibility.
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