That ain't nothing..wait till u see this press release!
LUMN next week????
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<<<Friday August 25, 7:00 pm Eastern Time
Morningstar.com
The IPO Week Ahead
By George E. Nichols
The IPO market remains on vacation after a relatively uneventful week, and nothing noteworthy is on tap for next week. But there are some offerings worth watching in the coming months.
Among the startups crowding the IPO calendar, Transmeta (Nasdaq: TMTA - news), transcends the pack. The company's semiconductors are designed for mobile computers. Its Crusoe family of microprocessors consume less power and generate less heat.
Transmeta boasts a strong pedigree and is targeting a lucrative market. The firm is loaded with sharp minds such as Linus Torvalds, originator of the Linux operating system. Among its investors are Paul Allen's Vulcan Ventures, Sony, and Gateway. Transmeta's financials look thin at the moment; for the quarter ending in June, the company lost $23.6 million on $354,000 in sales. But top-line growth is increasing sharply from the previous four quarters, when combined revenue was only $19,000. Not reflected in the financials are new major customer wins, including IBM, Sony, and Gateway. Despite its weak financials, Transmeta should be among the most eagerly anticipated IPOs for the remainder of the year.
An IPO preview wouldn't be complete without acknowledging the hot optical-networking market. Among the most promising offerings in this area is Luminent (Nasdaq: LUMN - news).
The company competes with Infineon (NYSE: IFX - news), Finisar, and JDS Uniphase. Valuations for these companies vary widely, but Luminent shouldn't have too much trouble reaching a price/sales multiple of at least 20, giving it a valuation of $1.6 billion.
Luminent's financials are much less ethereal than Transmeta's. Sales for the June quarter were $28.7 million, up 78% from the year before. Unlike most IPOs, Luminent has been profitable for each of the past five years. Huge amortization charges of $12.6 million resulted in a net loss of $11.0 million for the last quarter, but those are noncash charges--the company managed to generate $989,000 in operating cash flow for the first half of the year.
Luminent will be spun off from parent company MRV Communications (Nasdaq: MRVC - news), whose roots are in the local-area network switching business. MRV has repositioned itself as an incubator of optical networking companies and reportedly plans to spin off at least 14 of them. Its stock is up 133% this year, indicating investor enthusiasm for Luminent and other MRV holdings.
But Luminent isn't the only spin-off on tap. In fact, the coming weeks will see a spin factory. There have been some notable ones this year already: Palm was spun off from 3Com and Tycom (NYSE: TCM - news) from Tyco. Lucent and Qualcomm are expected to join the party. Taking it to the extreme is Cabletron (NYSE: CS - news), which is splitting into four entities; Riverstone Networks is expected to be the first of its units to file for an IPO.
Spin-offs are taking off as companies seek greater market valuations for their businesses. Wall Street loves to digest bite-sized chunks instead of large companies composed of several disparate businesses. That's why it made perfect sense for highly undervalued companies such as Methode Electronics (Nasdaq: METHA - news) and Tyco to spin off their fast-growing optical units. According to IPOCentral.com, two of the four largest offerings this year (not including foreign ADRs) were either spin-offs or tracking stocks. Like spin-offs, tracking stocks are another way for companies to reap higher market valuations. But unlike spin-offs, tracking stocks are largely an accounting gimmick. The largest offering of the year was the AT&T Wireless tracking stock; Global Crossing will soon issue a tracker for its Web-hosting unit. >>> |
