Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : Technical analysis for shorts & longs -- Ignore unavailable to you. Want to Upgrade?

To: IA who wrote (27123)	6/26/2000 1:02:00 PM
From: Johnny Canuck	Respond to of 68209

www2.briefing.com IPO Preview: Stratos Lightwave (STLW) 26-Jun-00 00:05 ET [BRIEFING.COM - Robert J. Reid] Stratos Lightwave is an exciting IPO which should begin trading early this week. We expect it to trade very strongly out of the gate. Additionally, Methode Electronics (METHA 43 1/4) which will retain roughly 85% of STLW is an interesting play in its own right. Stratos Lightwave (STLW) Background. Stratos Lightwave makes optical subsystems and components for high data rate networking, data storage and telecommunication applications. Optical subsystems convert electronic signals into optical signals and back into electronic signals which facilitates the transmission of information over optical communication networks. These optical subsystems are designed for use in local area networks, storage area networks, metropolitan area networks, wide area networks and central office networking in telecommunication markets. Stratos posted net sales of $71.8 million in the fiscal year ended April 30, up 54% year-over-year. Details of IPO. Currently, STLW is a wholly-owned subsidiary of Methode Electronics. After the completion of the offering, Methode will own approximately 84.3% of STLW. Although not obligated to do so, Methode plans to divest its remaining equity interest as a distribution to its stockholders within 6-12 months. Stratos is offering 8.75 million shares to the public and there will be roughly 64.1 million shares outstanding after the offering. Trading Points While Stratos is being priced between $16-$18 per share, we expect the issue will trade significantly higher. Network-infrastructure companies are doing particularly well in the IPO market recently. For example, optical networking equipment maker ONI Systems (ONIS 115 1/2) has been on fire since its IPO on June 1. ONIS priced at $25, opened at $80 and has traded as high as $142. With 123.9 million shares outstanding, ONIS has fetched an incredible market cap of $14.3 billion. We believe Stratos is even more financially sound with a track record. ONIS had only $3 million in revenue last year (although $3.6 mln in MarQ) versus $71.8 million for Stratos. Annualizing the March quarter, ONIS sports a price-to-sales ratio of 993x. If Stratos achieves a p/s ratio of even 1/20th that of ONIS, that would price the shares at $55. A more established competitor, Finisar Corp. (FNSR 23 1/16), trades at a p/s of 55x which would price Stratos shares at $62. Another play on this IPO is to purchase METHA shares down the road. What you will typically see happen is the parent company's shares will run up immediately prior to the spin-off. Since it is so close to the IPO date, there is likely not a lot of upside in METHA shares at the moment. Historically, there is a sell-off in the parent company shares directly after the spin-off. This is where opportunity lies. Remember that the distribution to METHA shareholders of the remaining 85% of STLW is 6-12 months away - a lifetime for many traders who will not wait around for it. Eventually, METHA should trade in lock-step with STLW shares especially when the date of the distribution is announced. If METHA drifts lower over the next couple of months, it would be very attractive just for its stake in STLW alone. If Stratos trades up to even $40 which would be cheap relative to its competitors, Methode's stake in Stratos would be worth more than the market cap for Methode as a whole. Methode's current market cap is $1.5 billion. The market cap of 85% of Stratos at $40 per share is $2.2 billion. This is to stay nothing of Methode's electronic business which has annualized sales of $312.3 million which is not being spun-off. In other words, the ongoing operations of Methode's electronic business is being valued at a negative $0.7 billion. If Stratos shares were to take off, Methode could break with tradition and trade higher right away as investors would seek to exploit this price disparity. If Methode does sell off, it would be a screaming buy in a month or two assuming Stratos shares do well. Other factors to consider are that Stratos will have a small float of only 8.75 million shares, very similar to ONIS' float of 8 million shares. A small float moves the shares up or down very quickly. Also, Stratos' lead underwriter is Lehman Brothers which has a good reputation it would not want tarnished. Finally, Methode is currently profitable with earnings expected to grow 24% this year to $1.18 per share.

To: IA who wrote (27123)	6/27/2000 3:42:00 AM
From: Johnny Canuck	Read Replies (1) \| Respond to of 68209

Monday June 26, 7:20 pm Eastern Time IPO PRICING-Stratos Lightwave prices $21/shr above range NEW YORK, June 26 (Reuters) - Stratos Lightwave Inc. (Nasdaq:STLW ), raised $183.75 million when it sold 8.75 million shares at $21 each, in its initial public offering on Monday. The company, a unit of Methode Electronics Inc. (NasdaqNM:METHA ), sold the shares above the expected pricing range of $16 to $18, said lead underwriter Lehman Brothers. Chicago-based Stratos makes optical subsystems for high data rate networking, data storage and telecommunications applications that convert electronic signals into optical signals and back. ************************ Stratos Lightwave set to shine Stratos, Marvell priced above expected ranges By Steve Gelsi <mailto:sgelsi@marketwatch.com>, CBS.MarketWatch.com Last Update: 4:09 PM ET Jun 26, 2000 cbs.marketwatch.com