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Austin, Texas, Oct. 20 (Bloomberg) -- Crossroads Systems Inc., which makes devices for high
speed storage and retrieval of data from different storage systems, more than quadrupled in its first
day of trading.
The Austin, Texas-based company rose 60 23/32 to 78 23/32, a 337 percent gain, making it the
fifth-biggest gain for a U.S. stock in its first-day trading. About 11 million shares changed hands and
the company ended the day with a market value of $2.02 billion.
There is a ``big, growing market for storage area networks (and)
routers are a key component,' said Clinton Morrison, an analyst with
John G. Kinnard & Co., a Minneapolis-based securities firm.
``Crossroads is clearly recognized as the leader in routers for this
marketplace.'
Crossroads said its routers help organizations store larger amounts of
data and transfer it more efficiently than traditional computer networks
in which each storage device is connected to just one server.
Storage area networks -- or SANs -- are expected to become
increasingly important as companies spread out their computer
systems over the Internet. Crossroads said in documents filed with
the U.S. Securities and Exchange Commission its routers decrease
network congestion, reduce the time required to back up data and
make for more efficient use of storage.
There has been ``a lot of hype about SANs, but it's finally starting to
move,' said Michael Geran an analyst at the Pershing division of Donaldson Lufkin & Jenrette
Securities Corp.
Emulex, QLogic
Before Crossroads' sale, Emulex Corp. and QLogic Corp., two Costa Mesa, California-based
companies that make products for storage area networks, soared as investors decided the
technology was important, Geran said. Emulex is up 566 percent this year and QLogic is up 147
percent.
Crossroads Systems says it has sold approximately 6,000 of its storage routers through companies
including Compaq Computer Corp. and Hewlett-Packard Co. who include the routers in storage
systems they design and sell. It lost $3.6 million on revenue of $11.8 million in the nine months
ended July 31 compared with a $3.8 loss on revenue of $2 million in the same period a year earlier.
The company said it expects to use about three-fourths of the IPO proceeds for working capital, with
the remainder divided between capital spending, marketing and product development. Crossroads
Systems yesterday sold 3.75 million shares, a 15 percent stake, at $18 each to raise $67.5 million.
The share price was $2 above the top of the $14 to $16 range set before the sale by SG Cowen
Securities, which handled the offering.
Chief Executive and Chairman Brian R. Smith, 34, started Crossroads in 1995 with T. Dale
Quisenberry, 40, who is now the vice president of corporate accounts. Smith, holds a 18.4 percent
stake in the company following the IPO; Quisenbery holds a 4.6 stake.
Management
Smith previously held various management positions at IBM, where he led the development of IBM's
fiber channel technology, the company said.
President James Moore, 61, worked previously at Cirrus Logic Inc. a chip manufacturer. He holds a
2.5 percent stake in the company following the IPO.
Board member and venture capitalist William Wood, 43, holds a 24.2 percent stake following the
IPO.
Crossroads trades under the symbol ``CRDS' on the Nasdaq Stock Market. Dain Rauscher Wessels
and Morgan Keegan & Co. helped with the sale. |
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