Akamai, Chartered Semi IPOs take off
Investors in the US went gaga Friday over Web traffic management technology.
IPO Akamai rocketed up 458 percent to 145 3/16 -- a gain of 119 3/16 for the session. The company priced shares at $26 (£16) each Thursday night, well above its increased $16-$18 range for trading Friday.
Akamai's FreeFlow service finds space for its Web sites on multiple servers, which speeds up Web site downloads and protects against crashes caused by excess demand. Using software based on its proprietary algorithms, Akamai monitors Internet traffic and delivers content by the most efficient route. Cisco has a $50m (£31m) stake, and Microsoft has a $15m investment in the company with a mathematical algorithm that makes the Web faster. Morgan Stanley is the lead underwriter for the offering of 8 million shares, Donaldson Lufkin & Jenrette and Salomon Smith Barney are the co-managers. Shares are expected to price between $16 and $18 each.
"It's in a new technology category," which is bound to make it hot, said Francis Gaskins of the IPO Desktop. Gaskins compares Akamai to Inktomi, the main player in a market predicted to grow from $2bn to $23bn by 2002 according to IDC.
This past August, Akamai formed an alliance with Cisco Systems to develop new routing, switching and caching technologies to improve content delivery. As part of the deal, Cisco took a $49m stake in Akamai.
Inktomi's recent move to buy content distribution and tracking software company WebSpective Software may be an attempt to keep up with Akamai as it gets a boost of IPO funding. Inktomi had $25.3m in revenue in the first half of its fiscal year, which ends this month, while Akamai had just $404,000 in revenue, and a net loss of $9.7m in the six months ended 30 June.
Other initial public offerings Friday:
- Chartered Semiconductor shot up 13 3/16 to 33 3/16, a 66 percent gain for the day. The Singapore semiconductor wafer foundry priced its 22.5 million shares at $20, way above its price range of $16-$18. The lead underwriter is Salomon Smith Barney, with CS First Boston and Hambrecht & Quist acting as co-managers.
Charter's top five customers are Hewlett-Packard, Lucent Technologies, Level One Communications, Broadcom and Conexant. The company also has technology alliances with semiconductor companies such as Lucent and Motorola.
Chartered had $183.3m in revenue for the three months ended 30 September, compared to $83.9m for the same period last year. Chartered has dramatically narrowed its losses while increasing revenue; net loss for the 1999 period was $6.2m, compared to $52.7m for the 1998 quarter.
Finding shares wasn't a problem with such an unusually large float. The company upped its offering from 14.75 million to 15.75 million. The company wires buildings with fibre optic cable. Though revenue was a mere $547,000 for the six months ended 30 June, net loss for the six months was $19.5m. Goldman Sachs is the lead underwriter for the offering, Merrill Lynch and Donaldson Lufkin & Jenrette are co-managers. Forrester Research projects that the market for data networking services and Internet access will grow from $9.6bn in 1998 to approximately $49.7bn by 2002, of which approximately $27.9bn will be generated from services provided to business customers.
It's hard to predict the company's success since most others in the space have a limited customer base, Gaskins said. Allied has signed up a lot of buildings, and should have an ongoing subscriber base.
Risks aside from the uncertainty of the company's business model includes a planned $16m charge for modifying the company's current system in the second half of the fiscal year. Present systems have been identified as inadequate to meet the company's increased demands for billing and collections, and work-flow.
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