Optical/IP Networks

Oplink Soars on Market Debut

Oplink Communications (Nasdaq: OPLK) went public today, and its share price nearly doubled in its first hour of trading.

Shares were trading at $32.75 early this afternoon, rose to a high of $36, then closed at $33.62. Its market capitalization is now about $5.177 billion. The vendor had changed the price of its offer of 13.7 million shares to $18 per share Tuesday night, up from earlier estimates of $14 to $16. The lead manager for the IPO was Robertson Stephens

Despite the flashy debut, Oplink's setting sail in rough waters. It faces a range of challenges, internal and external. It's not profitable -- it has an accumulated deficit of $32.5 million. And as previously reported in Light Reading, its top customers are also its rivals (see Oplink Opts for $172 Million IPO).

JDS Uniphase Inc. (Nasdaq: JDSU) and Lucent Technologies Inc. (NYSE: LU) accounted for 42.6 percent and 10.6 percent, respectively, of Oplink's revenues for the year ended June 30, 2000, but these vendors also are listed among Oplink's chief competitors in its latest S-1/A filing with the U.S. Securities and Exchange Commission.

Furthermore, Oplink's tangled in litigation: E-Tek Dynamics, the DWDM component maker JDSU acquired earlier this year, has filed a patent infringement lawsuit against Oplink. Chorum Technologies Inc. has filed a similar motion.

But Oplink has a strong suit, too -- manufacturing capacity in the midst of a components shortage (see Test Gear Shortage Snags Startups and Components Shortage Delays Deliveries). The company has 209,500 square feet of space and 804 employees in three locations in China, giving it a key advantage in volume production and cheap labor.

And in today's market, that means business. "In the near term, companies that can produce product that meets spec can sell it," says Max Schuetz, optical networking analyst at Thomas Weisel Partners. He says this trend will continue until shortages in the components market ease.

Oplink says it will use the money raised by this IPO to expand its capacity even more, hire more people, and widen its customer relationships.

-- Mary Jander, senior editor, Light Reading http://www.lightreading.com

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