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Technology Stocks : IPOs: Too many, too fast, to little buyers? -- Ignore unavailable to you. Want to Upgrade?

To: RockyBalboa who wrote (63)	2/7/2001 6:47:44 PM
From: RockyBalboa	Read Replies (1) \| Respond to of 84

K-Ching! Cisco's bad news hurts KPMG just before it goes public By Emma-Kate Symons NEW YORK, Feb 7 (Reuters) - KPMG Consulting plans to sever ties with Cisco after its Wall Street debut tomorrow, but Cisco's untimely profit warning that rocked U.S. stocks on Wednesday is keeping the companies entwined longer than the technology consulting giant may like. KPMG will use around $400 million of the estimated $1.9 billion proceeds of Thursday's scheduled initial public offering to buy out Cisco's stake in its business. Yet because of Cisco's disappointing earnings results, which drove the Nasdaq down to its lowest close in almost a month, KPMG is facing the most difficult market conditions in which to go public since the brief technology rally began in early January. Analysts said the Cisco-driven market dive will force KPMG, one of the world's largest technology consulting firms, to lower the price of its stock offering tonight, postpone it, or risk a tepid debut. ``Definitely the KPMG valuation -- if they get it done -- will be lightened up considerably because of the waning of confidence,'' said Ward Morgenthau of Laidlaw Global Securities. ``I think it's not only extremely possible but likely.'' Technology issues sank on Wednesday under the weight of Cisco's earnings results, which missed Wall Street estimates for the first time in more than six years. The Nasdaq Composite Index (^IXIC - news) sank to its lowest level since early January, to close down 2.13 percent, at 2,607.82. Cisco, a Nasdaq heavyweight, is the world's largest maker of computer network networking equipment. KPMG Consulting said in its filing with securities regulators that it will use part of the proceeds of its initial public offering of 112 million common shares at $16 to $18 to repurchase its preferred stock held by Cisco Systems Inc (NasdaqNM:CSCO - news). Proceeds from the IPO also will go to its parent company KPMG LLG, one of the Big Five U.S. accounting firms. By late Wednesday, Morgan Stanley, chief underwriters of the KPMG Consulting's IPO, said the deal would price as scheduled, and trade on Thursday. ``I can't believe it's going public after Cisco reports,'' said David Yockelson, an analyst with the META Group. And Morgenthau pointed out that "it's not even a question of KPMG wanting to brave the market -- it's really a question of the underwriting group wanting to brave it also. ``You might want to wait for a day when the sun is shining,'' Morgenthau added, ``or a week when the sun is shining before you venture out into blizzard.'' KPMG Consulting also risks unfavorable comparisons with pure Internet consulting firms, which have seen their share prices plummet as business has slowed during the broader economic slowdown, and as technology stocks have slumped. ``It should be about what it can do for technology, not seen as a technology company,'' said Yockelson. ``The danger is that people look at KPMG and what they end up seeing is another (Internet consultancy) Viant (NasdaqNM:VIAN - news), or Razorfish (NasdaqNM:RAZF - news), which is wrong.'' The overall market for new stock offerings is also watching the KPMG arrival on Wall Street closely, as the first major deal of 2001. Despite an IPO boom in 1999 and early 2000, only a handful of companies went public in January this year, after dozens of mainly technology companies withdrew their planned offerings. ``The IPO patient is in its death throes and people are wondering whether it will revive,'' said Kennedy Information's Marshall Cooper, an analyst who tracks the consulting industry. Cooper said the cyclical nature of consulting means the firms do well when the markets are doing well, but suffer during slowdowns as companies cut back on consulting fees. ``The overall industry is also questioning whether consultancies should be public at all,'' Cooper. ``They can be great firms, but they're poor public companies because Wall Street demands consistent earnings and accurate forecasts, and the nature of consulting doesn't lend itself to either.''