Anybody buying?
Transmeta's IPO Is Priced at $21,
Double the Original Target Price
By Molly Williams and Suzanne McGee
Staff Reporters of The Wall Street Journal
SANTA CLARA, Calif. -- The buzz surrounding Transmeta Corp. reached a new high Monday night when the company's 13 million-share initial public offering was priced at $21 a share, raising at least $273 million for the company in one of the hottest IPOs seen in many months.
The price at which the shares were sold to a wide range of institutional investors was nearly double the original target set by Transmeta's underwriters, led by Morgan Stanley Dean Witter & Co. and Deutsche Bank AG's Deutsche Banc Alex. Brown. Last Friday, the underwriters boosted that target price to $16 to $18 per share from $11 to $13.
That upward move in pricing, which came despite the defection last week of an important client, International Business Machines Corp., reflects investors' enthusiasm for Transmeta's low-cost, low-power microprocessors. Products such as Transmeta's are expected to be essential building blocks in the push toward mobile computing.
Underwriters have a 30-day option to acquire an additional 1.9 million shares for resale to investors. It isn't yet known whether they will exercise that option, although people familiar with the transaction said the deal was so heavily oversubscribed that the so-called green shoe will be exercised. That would raise an additional $39.9 million for Transmeta.
Transmeta is taking on chip giant Intel Corp. with its new Crusoe microprocesors, which use software technology to perform some functions. That allows Transmeta's Crusoe to be smaller and more efficient than chips from Intel. Transmeta generated a huge buzz by keeping its business plan secret for almost five years and attracting employees such as Linus Torvalds, developer of the Linux operating system. Early investors included Microsoft Corp. co-founder Paul Allen's Vulcan Ventures. Transmeta first unveiled the product in January and started shipping it a few months ago.
Transmeta shares are expected to begin trading Tuesday on the Nasdaq Stock Market under the symbol TMTA.
But even after completing a successful IPO in a rocky market environment, Transmeta still faces big hurdles. Intel -- which has a track record for using its market share and pricing power to crush potential competitors -- has stepped up development of its own low-power chips. Transmeta, whose customers now include a number of large Japanese personal-computer manufacturers, must persuade a big U.S. PC maker to adopt its products. Last week, IBM dropped plans to use a Transmeta product in its coming Thinkpad.
"Long term, Intel can get very aggressive," said Christian Koch, portfolio manager at Trusco Capital Management, which owns eight million Intel shares. But that didn't stop Mr. Koch from snapping up shares in Transmeta Monday night, and predicting that the buzz around Transmeta's deal is likely to weigh on Intel's stock price for several weeks.
Write to Molly Williams at molly.williams@wsj.com and Suzanne McGee at suzanne.mcgee@wsj.com |
