Investors Bow Before Tut IPO
(01/29/99, 7:34 p.m. ET)
By Sergio G. Non, TechWeb
Internet-inspired investors had an immediate impact
Friday on the value of Tut Systems.
Shares of Tut, which specializes in systems for
high-speed data communications, more than tripled in
value on their first day of Nasdaq trading under the
symbol TUTS. From its IPO price of 18, Tut stock
swelled 219 percent to close the day at 57 1/2, up 39
1/2.
Such roaring debuts have become the norm for almost
any IPO perceived as an Internet play. Lead
underwriter Lehman Bros. anticipated high demand for
Tuts' offering -- earlier this week, the IPO price was
raised from the previously planned range of 14 to 16.
The 2.5 million shares sold publicly represent 22
percent of almost 11 million shares outstanding. Of the
more than $40 million that Tut netted from the IPO,
$2.5 million will be used to acquire intellectual property,
and the rest will be used for general corporate
purposes.
Tut sells systems -- including multiplexors, routers,
modems, Ethernet extension products, and software --
for broadband data access over copper wires.
Last year, the company's losses increased by 50
percent, to $13.7 million from $9.2 million in 1997.
Sales rose nearly 70 percent over the same period, to
$10.6 million from $6.2 million.
Again following the recent norm, investors overlooked
losses to make another Internet bet.
Although virtually all of Tut's business since it began in
1991 has come from XL products for corporate
networks, the company plans a big push this year into
the market for high-speed Internet access to hotels,
dormitories, and apartment buildings, said Amanda
Berman, Tut spokeswoman. Tut also sells back-end
high-speed systems for ISPs and other companies
offering xDSL service.
Such a push might be coming at just the right time. In its
IPO filing with the U.S. Securities and Exchange
Commission, Tut said it expects its XL products to be
caught in a continued price war.
The company already faces several larger competitors,
including Ascend Communications, PairGain
Technologies, and the Gargantua of the networking
industry, Cisco Systems. And xDSL technology
competes with cable modems and other forms of
high-speed Internet access trying to gain wide
acceptance.
Tut's geographic mix could also pose a risk, given the
global economic climate. More than 18 percent of Tut's
business came from overseas sales last year, and that
percentage is expected to rise.
This is a stock to hold this year.....a real gem |
