x
Optical/IP

Market Gives Tellium a High Five

Shares of Tellium Inc. surged 40 percent above their offering price on Thursday after the company completed its initial public offering.

Lead bankers Morgan Stanley Dean Witter & Co. and Thomas Weisel Partners priced the shares at $15 last night. The sale of 9 million shares brings Tellium $135 million in new funds, which is about 48 percent below what Tellium originally expected when it first filed for its IPO.

The shares closed their first day of trading at 20.93, 40 percent above the offering price of $15, after trading as high as 23.15 during the day.

Tellium picked an interesting day to go public: The market for technology stocks was following up a powerful rally that started Wednesday, and Ciena Corp. (Nasdaq: CIEN), Tellium's major competitor, beat sales forecasts in announcing results for its second fiscal quarter (see Ciena Struts Its Stuff).

The improved market conditions allowed bankers to bump up the size of Tellium's offering by 1.5 million shares from the company's last Securities and Exchange Commission filing. The IPO completes months of preparation for Tellium, in which it altered its filing several times and even changed lead investment banks from Goldman Sachs & Co. (NYSE: GS) to Morgan Stanley and Thomas Weisel (see Tellium Switches IPO Bankers). Other bankers supporting the IPO included UBS Warburg, CIBC World Markets, and Wit Soundview (Nasdaq: WITC).

In past SEC filings, Tellium's offering has ranged in size from 17.5 million to 7 million and its share price has fluctuated from $8 to $15 during the past few months (see Tellium Bids for $250 Million IPO, All Eyes on Tellium IPO, Tellium Switches IPO Bankers, Tellium Lowers Its IPO Ambitions, Tellium Hits the Road , and Tellium IPO Set for Next Week).

Tellium, which makes core optical switches, competes against companies like Ciena Corp. (Nasdaq: CIEN), Corvis Corp. (Nasdaq: CORV), Nortel Networks Corp. (NYSE/Toronto: NT), and Sycamore Networks Inc. (Nasdaq: SCMR).

While investors on Tellium's road show may have been comforted by the size of its customers, two of Tellium's major customers, Qwest Communications International Corp. (NYSE:Q) and Extant Inc., were give pre-IPO shares as incentives to the relationship. Tellium has also listed energy company Dynegy Inc. (NYSE: DYN) as its customer, but Ciena announced today that Dynegy had become one of its customers.

Tellium's most recent SEC filing showed that Dynegy and Qwest accounted for about 70 percent and 30 percent, respecitively, of Tellium's revenues for the three months ended March 31, 2001. Cable and Wireless (NYSE: CWP), another customer, is not a Tellium shareholder. Tellium hasn't counted any revenue from the C&W contract yet, according to its filing dated April 27.

Tellium is the first optical networking startup to stage an IPO in 2001. The only networking equipment and component companies that have tested the IPO waters this year were spinoffs, rather than true startups. These include Agere Systems (NYSE: AGR), Lucent Technologies Inc.’s (NYSE: LU) component spinoff, which was pushed out into the public market at the end of March at a reduced price of $6 a share (see Agere's Fistful of Dollars). Riverstone Networks (Nasdaq: RSTN), which was the first networking company to IPO this year, was priced at $12 a share when it went out in February (see Riverstone IPO Toughs It Out).

-- Phil Harvey, Senior Editor, and R. Scott Raynovich, Executive Editor, Light Reading http://www.lightreading.com
OpticalValueLine 12/4/2012 | 8:24:46 PM
re: Market Gives Tellium a High Five It is amazing. Have to say its IPO very successful. Hope it will hold above $15 for at least 1 month.
big_cecil 12/4/2012 | 8:24:45 PM
re: Market Gives Tellium a High Five Congratulations Tellium. I'm the first to admit
when I am wrong. IPO was a much bigger hit than I was expecting. Great timing ! Caught the market in an upswing and CIEN announcement this AM was positive. I'm sure the IPO was timed with CIEN reporting - good call by TELM management. Will it hold up ? I still doubt it, but Schwab wouldn't let me short it at $22 today, so I cant back that up with cash. Now that they are a public company and under the scrutiny of investors they have to start generating revenue and some day be profitable. I suspect they have something up their sleeve - Morgan Stanley is the best on the street at holding up their IPOs.
syzygy 12/4/2012 | 8:24:42 PM
re: Market Gives Tellium a High Five Well, its that time Big_Cecil.
Eat Crow.
Oh, and grab a plate for Jimmy.
I am proud to say that I believe my children do a better job with their homework than either of you.
Any other recommendations?
Your Friend,
Syzygy
popotoafd 12/4/2012 | 8:24:40 PM
re: Market Gives Tellium a High Five "While investors on Tellium's road show may have been comforted by the size of its customers, two of Tellium's major customers, Qwest Communications International Corp. (NYSE:Q) and Extant Inc., were give pre-IPO shares as incentives to the relationship. Tellium has also listed energy company Dynegy Inc. (NYSE: DYN - message board) as its customer, but Ciena announced today that Dynegy had become one of its customers."

FWIW... While it may sound like Dynegy is a new additional customer in your article, it actually only bought Extant so I am not sure you can count in separate from Extant. Furthermore, in contrast to what you stated in your article Dynegy was announced as a Ciena customer quite some time ago as it bought the Iaxis assets (which had been a Ciena customer...)

http://www.ciena.com/news/arch...

big_cecil 12/4/2012 | 8:24:36 PM
re: Market Gives Tellium a High Five Check back in 6 months ... after 2 quarters
of increasing losses, a 20% layoff and a
single digit stock price.

I'll be here, will you ?
manoflalambda 12/4/2012 | 8:24:35 PM
re: Market Gives Tellium a High Five Heya,

I hear the employee options mature in 90 to 180 days. Be interesting to see where they are then. Anyone know what employee options are set at? (I gather Harry's were at $1... )

Salute,
Manoflalambda

psThink Lucent should cash in its 8%?
HOME
Sign In
SEARCH
CLOSE
MORE
CLOSE