Vendors Soar Through Public Offerings
By Monica Alleven
Qualcomm Inc. isn't the only high-flying wireless stock.
OK, so no one has quite matched Qualcomm, which has risen more than 1,000 percent year-to-date and closed as high as
$406.12. But some hardware and software companies have shown extraordinary growth in their stocks, similar to the frenzy
among wireless service providers, with 200-, 300- and 400-plus percent increases year-to-date.
Phone.com, formerly Unwired Planet, led the charge in June with its wildly successful initial public offering, widely believed to
be the most successful technology IPO of the year. But others have made respectable showings of their own. Wireless Facilities
Inc., Agilent Technologies and Aether Systems are among the most recent vendor IPOs. And more mature wireless companies
also have seen their stock prices surge over the past year as wireless phones proliferate and mobile data nears the reality stage.
Why the newfound interest in wireless equipment stocks? Reasons vary as much as the individual companies. But analysts point
out that there are a limited number of opportunities for investors who want to get into wireless, particularly wireless Internet.
For Phone.com, the allure is wireless and the Internet. But management gets high marks as well for leading the charge toward
the open Wireless Application Protocol standard and persuading dozens of top manufacturers and carriers to support it.
"People like infrastructure plays, and this one is especially compelling because you're talking about enabling 1 billion wireless
phones to access the Internet," says Marianne Wolk, an analyst at Robertson Stephens. "It's several leaps ahead of all potential
competitors right now."
In other words: "This is a good company in a hot space," says Matt Hoffman, analyst at Soundview Technology Group, an
investment banking firm in Stamford, Conn.
Others aren't too shabby, either. Wireless trading applications developer Aether Systems came screaming out of the gates last
month, and early last week, it was trading in the high $70s after hitting a high of $89.37. Wireless Facilities, a San Diego
consultant for wireless network deployments, debuted with 4 million shares priced at $15 per share on Nov. 5. Last week, it
was trading in the low $50s after hitting a high of $74.37. Agilent Technologies, the test and measurement arm spun off from
Hewlett Packard Co., was priced at $30 per share Nov. 17 and traded as high as $50 before settling in the low $40s last
week.
As for more mature vendors, they're benefiting as well. In October 1998, Ericsson was under $20 per share. Now it's in the
high $40s, staging a greater than 250 percent return. Big names such as Nokia and Motorola and smaller companies such as
Metricom and Research In Motion also gained from rising stock prices after some marginal or downright bad years.
Of course, there still exist those gone-nowhere wireless stocks. Glenayre Technologies, in the throes of restructuring after years
of serving the paging infrastructure market, hovers in the $3 to $4 per share range. Geoworks, another wireless applications
play, still trades in the low single digits, and distributors such as Brightpoint Inc. and CellStar Corp. have yet to reach the
double digits.
Even Phone.com has yet to turn a profit, and some investors argue it's overvalued or ripe for a correction. Phone.com's success
depends on its ability to raise revenue from the sale of the UP.Link Server Suite software and related services. The company
had 215 employees in June today, it employs 425, and such astounding growth requires adequate managerial, operational and
financial support. Plus, plenty of competitors are coming down the pike, including big-name firms such as Microsoft, Ericsson,
Nokia and the Qualcomm/Microsoft venture known as Wireless Knowledge LLC.
Wireless Facilities does have net income, but it faces some of the same challenges as Phone.com. Wireless Facilities' employee
base rose from 83 in January 1998 to 508 by the end of June 1999, putting pressure on its resources. The company
acknowledges it may not be able to hire or retain all the qualified engineers it needs.
And both Phone.com and Wireless Facilities are well aware of the volatility associated with their stocks. Earlier this month,
Phone.com staged a secondary public offering of 6.6 million shares priced at $135 per share. That offering was designed to
raise capital to fund growth, but Phone.com also wanted to unleash some of the shares due for release in December when
management's 180-day lock-up expires from the IPO, thereby reducing the potential for more volatility.
Perhaps the best approach amid such heady times is to follow the lead of Phone.com CFO Alan Black. Asked whether
Phone.com is indeed the best-performing IPO of the year, Black says he wouldn't know; he's focused on running the
day-to-day business, not obsessing about such trivia. Given what's at stake for Phone.com, that sounds like the wisest move of
all.
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