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Strategies & Market Trends : Galapagos Islands -- Ignore unavailable to you. Want to Upgrade?

To: Jorj X Mckie who wrote (15772)	12/8/2002 2:52:17 PM
From: Challo Jeregy	Read Replies (1) \| Respond to of 57110

Reuters Don't Look Now but There's a Tech IPO Sunday December 8, 11:42 am ET By Jake Keaveny NEW YORK (Reuters) - Stop the presses, there's a technology IPO. This week all eyes are on Seagate Technology Holdings, the largest U.S. maker of disk drives. Seagate hopes to raise $1 billion on Tuesday from the biggest initial public offering by a technology company since July 2001, when consultant Accenture Ltd. (NYSE:ACN - News) raised $1.9 billion. The sale deserves attention for a couple of reasons. First, it comes amid one of the weakest IPO markets on memory. Technology IPOs have only raised $265 million all year -- a fraction of the $10 billion generated in 2001 or the $30 billion from 2000. Market watchers say Seagate's IPO could help crack open access to capital markets for cash-hungry technology companies. Seagate, with an expected $6 billion market value, doesn't compare with younger start-ups that are squeezed for capital. But investment in the battered disk-drive industry would reflect a bet by investors that technology in general has seen its worst. Also, the sale would be a huge success for the group of buyout funds that took Seagate private just two years ago. Groups like J.P. Morgan (NYSE:JPM - News), Goldman Sachs & Co. (NYSE:GS - News) and Texas Pacific Group stand to multiply their returns after buying Seagate on the cheap and building it back up. "I think much of Wall Street is going to have to be impressed with this group," said David Menlow, president of newsletter IPOfinancial.com. Menlow said Seagate is more of an individual turnaround story than a measure of investors' willingness to get back into technology stocks. But with the backdrop of a recent rally in the technology-heavy Nasdaq stock index, the successful sale of Seagate's shares would probably encourage other technology companies to try to tap the stock market, he said. Managing the IPO are investment banks Morgan Stanley (NYSE:MWD - News) and Citigroup's (NYSE:C - News) Salomon Smith Barney unit. SEAGATE'S TURNAROUND Seagate went private in March 2000 in one of the largest management buyouts in high-tech history. Silver Lake Partners, an investment fund led by former Bear Stearns technology banker and current Seagate Chief Executive Steve Luczo, led a group that paid about $1.9 billion for the company's disk-drive operations. Seagate aims to sell 72.5 million shares at $13 to $15 each. At the $14 mid-point of the expected range, the company would have a market capitalization of about $6 billion, triple what Silver Lake and its partners paid for it. At the time Seagate was acquired, it was suffering from steep price competition. By taking it private, management was expected to cut prices and pare down its balance sheet without having to worry about the scrutiny that comes with being a public company. Menlow and other analysts said Seagate has been a success case, but the improvements to its bottom line are less than clear. In the year ended in June, Seagate had net income of $153 million on $6.1 billion of revenue, according to its prospectus. That compares with $214 million of net income on revenue of $6.2 billion during the comparable 2000 period that came largely before the buyout. However, last year's bottom line was a dramatic improvement from the more than $500 million that Seagate lost in the year ended July 2001. The disk-drive space is still fiercely competitive, and the company is directly linked to a still-weak computer industry, analysts said. However, the industry has consolidated dramatically. Analysts said Seagate only has two main competitors, Maxtor Corp. (NYSE:MXO - News) and Western Digital Corp. (NYSE:WDC - News), so it faces less pressure to compete on price. Investors in Seagate would be buying into the industry's biggest player. It had a 29 percent market share for the nine months ended in September, up from 23 percent in 2001, according to its prospectus. In what should be a helpful boost, share prices in both Western Digital and Maxtor have followed the Nasdaq and rebounded sharply since mid-October. Maxtor has more than doubled since early October, and Western Digital had almost doubled since late September before falling last week.