New Focus Leads The Charge On IPOs

New Focus Inc. http://www.newfocus.com, an optical components maker based in Sunnyvale, Calif., on Thursday aims to kick off what is likely to be a series of successful networking IPOs in the coming weeks.

Following New Focus, ONI Systems Inc. http://www.oni.com is scheduled to go public next week, with optical networking player Corvis Inc. http://www.corvis.com and networking company Cosine Communications Inc. http://www.cosinecom.com hoping to sell securities in the public markets over the course of the next couple of months.

Credit Suisse First Boston http://www.csfb.com, acting as the lead manager on the New Focus IPO, tonight expects to price 5 million shares of stock between $14 to $16 for trading in Thursday's market, making the total take somewhere in the vicinity of $70 million to $80 million.

Despite the recent rocky performance in the Nasdaq Composite index, networking companies have remained at the forefront of investor interest, making it likely that New Focus will have a hot IPO, even if the stock market has a down day. Bookham Technology PLC http://www.bookham.com, another optical components maker, more than doubled in its first day of trading on Nasdaq in early April. It is currently trading at 240 percent premium over its offering price, in the $57 range.

The New Focus S-1 registration statement filed with the Securities and Exchange Commission (SEC) lists Corvis and Agilent Technologies Inc. http://www.agilent.com as the company's top two customers.

In other connections in the optical world, there appears to be lingering bad blood between New Focus and Kaifa Technology Inc., which was recently acquired by E-Tek Dynamics Inc. http://www.e-tek.com. Kaifa has filed a complaint against New Focus for patent infringement in the United States District Court, Northern District of California. The suit has yet to be fully resolved and New Focus says it intends to "rigorously defend" it.

Regardless, IPO experts say that despite the technology bear market, optical technology is still receiving a warm reception in the public markets.

"In general the optical market has had a lot of interest," says Steven Tuen, director of research for the IPO Value Monitor. "If it [New Focus] comes out on a good market day, it will get a good pop, though you won't see the same pop you saw last year."

Last year, interest in optical startups and optical stocks accelerated following the Sycamore Networks http://www.sycamorenet.com IPO, which at the time broke records for first-day performance in the U.S. markets. The outstanding performance of JDSU shares has piqued investor interest in optical components.

New Focus is a component maker specializing in tunable lasers and testing equipment. It was founded in 1990 by Milton Chang, Ph.D., who is now chairman of the company. Chang was a seed investor in Uniphase, which eventually became part of JDS Uniphase Corp. http://www.jdsu.com (JDSU), and he also sits on the boards of Gadzoox Networks Inc. http://www.gadzoox.com, LightConnect Inc. http://www.lightconnect.com, Lightwave Electronics Corp. http://www.lwecorp.com, and Optical Micro-Machines Inc. http://www.omminc.com.

Venture backers of New Focus include Morgenthaler Ventures http://www.morgenthaler.com and U.S. Venture Partners http://www.usvp.com, both of which will own approximately 11 percent of the shares after the IPO. Founder Chang stands to hold 17 percent of the company following the offering.

"The IPO will attract considerable attention," says Jusuf Haque, an analyst with IPO Maven http://www.ipomaven.com. Haque says that there is a healthy market for optical components, but he also notes that New Focus will be competing with components heavyweights such as JDSU and E-Tek Dynamics, which are slated to merge.

--R. Scott Raynovich, excecutive editor, Light Reading http://www.lightreading.com
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