EMC to Spin Off McData Unit's B Stock in IPO
dailynews.yahoo.com
WASHINGTON (Reuters) - Data storage equipment leader EMC Corp. (NYSE:EMC - news) filed on Wednesday for an initial public offering of Class B common stock of its McData Corp. unit.
McData, which develops, makes and sells switching devices for enterprise-wide, high-performance storage networks, is looking to raise $100 million from the IPO, using the proceeds for general corporate purposes, including repayment of $1.9 million in outstanding debt to McData Holdings Corp., a subsidiary of EMC.
McData also plans to use some of the proceeds for capital expenditures and working capital, according to the filing with the Securities and Exchange Commission.
McData has applied to list the shares on the Nasdaq stock market under the symbol ``MCDT'' (Nasdaq:MCDT - news).
EMC shares were down 1-8/16 to 119-5/16 in afternoon trade on the New York Stock Exchange.
The exact number of B shares, their price range and other details will be disclosed in a later SEC filing. The offering will be managed by Credit Suisse First Boston, Deutsche Banc Alex Brown and Merrill Lynch.
EMC owns about 85 percent of McData and plans to distribute all of its McData Class A common shares to EMC stockholders on a pro rata basis about six to 12 months after the IPO.
However, EMC is not obligated to complete the distribution, which is subject to EMC getting word from the Internal Revenue Service that it will be tax-free to EMC and its stockholders, according to the filing.
McData, based in Broomfield, Colo., was acquired by EMC in 1995 and was established as an independent entity in 1997. Since 1997, when it focused its business on the design, development and manufacture of fiber channel switching devices, it has incurred losses in all but the two most recent fiscal quarters.
The company depends on EMC for a significant part of its total revenue. Sales to EMC, an original equipment manufacturer, represented about 71 percent of total revenue for the three months ended March 31. International Business Machines Corp. (NYSE:IBM - news) accounted for about 19 percent.
McData anticipates that future operating results will continue to depend heavily on sales to those two companies.
``Therefore, the loss of either EMC or IBM as a customer, or a significant reduction in sales to either EMC or IBM in any fiscal period, could significantly reduce our revenue,'' the company said in the filing.
(Revenues at McData rose to $47.1 million during the first quarter of this year from $13.2 million for the comparable period in 1999. The company had first-quarter net income of $5.3 million this year, reversing a $1.9 million loss for the first quarter of 1999.)
McData also has alliances with leading software companies like Microsoft (NasdaqNM:MSFT - news) and Tivoli, a division of IBM, to integrate its products with theirs.
The company said its biggest competitor in the market for fiber channel switching products is Brocade Communications Systems Inc. (NasdaqNM:BRCD - news).
[I can understand them not wanting to mention ANCR-QLGC's FC Directors, but who are they kidding but themselves? Where's BRCD's 32 port switch? They are "working on it." Time for McData to sink or swim? EMC shareholders may swallow a buy out on the open market that EMC might have found unpalatable as a private exchange. Wouldn't be surprised if BRCD is still "working on it" 6 - 12 months down the road.]
Douglas |
