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Thursday, July 31, 2003 6:06:18 PM
TECH WORLD: NTGR—NetGear Shines in Stock Market Debut
By Frederic Ruffy, Optionetics.com
7/31/2003 2:30:00 PM
Shares of NetGear (NTGR) surged on their first day of trading Thursday. The stock finished the day 26% above its initial offering prices. Investors cheered NetGear’s achievement because it was one of the few Initial Public Offerings [IPO] during 2003 so far to achieve a high degree of success. That, in turn, is perhaps an indication of increasing investor demand for new technology issues and a long awaited rebound in the market for Initial Public Offerings.
NetGear is a Santa Clara, Calif.-based company that designs, develops, markets and sells technologically advanced, branded networking equipment. Unlike many of its rivals that specialize in the large enterprise market, NetGear targets home markets and companies with 250 employs or less. According to the company’s web site (netgear.com), the company has so far sold over 17 million units and “as a result of NetGear’s brand name, the execution of its operating strategy and the growth in demand for networking products within small businesses and homes, the company has achieved net revenue growth each year since its inception in 1996.”
Investors eagerly bought shares of NetGear when shares debuted on Thursday. Lehman Brothers (LEH) led the IPO and priced seven million shares at the high end of the expected price of $12.00 to $14.00 a share. The price had been $10.00 to $12.00 a share, but Lehman Brothers raised the offering bid due to strong prepricing demand. Shares opened much higher than expected and started trading at $18.50 a share on the Nasdaq Stock Market Thursday morning.
One reason for NetGear’s warm reception on Wall Street probably owes to the fact that, unlike most IPOs so far this year, the company is profitable. In the first quarter, the company reported $67.7 million in revenues, which was up from $45.5 million last year. Furthermore, net income totaled $1.6 million, compared to a loss of $17.3 million last year. In short, the company’s operating profit in the first quarter may be one of the factors underpinning the successful IPO.
NetGear’s successful offering also comes on the heels of a period of strong performance in the networking sector. The nearby chart shows the one-year performance of the AMEX Networking Index ($NWX). The index, which tracks the performance of fifteen leading networking companies, has more than doubled since October of last year. The index is up nearly 40% during the past five months. Investors have been buying shares of networking companies on expectations that a turnaround in information technology spending is close at hand. Therefore, the sheer momentum within the networking sector is perhaps another factor underlying NTGR’s strong first day gains.
Some market watchers view NetGear’s successful debut as a sign of improving conditions in the new issues market. It was, in fact, the company’s second attempt at an IPO. The company filed to raise $130 million in September 2000, and just before the IPO market entered its long three-year slump. So the offering never took place. Now conditions are improving, however. This year, only eighteen companies have come to market. Eight have IPOs have taken place this month alone and the pace of Initial Public Offerings appears to be picking up. Going forward, if other offerings get warm receptions like NetGear’s, it will probably encourage more companies to return to the market and begin selling their shares to the public.
Frederic Ruffy
Senior Writer & Index Strategist
Optionetics.com ~ Your Options Education Site
Visit Fred Ruffy’s Forum
By Frederic Ruffy, Optionetics.com
7/31/2003 2:30:00 PM
Shares of NetGear (NTGR) surged on their first day of trading Thursday. The stock finished the day 26% above its initial offering prices. Investors cheered NetGear’s achievement because it was one of the few Initial Public Offerings [IPO] during 2003 so far to achieve a high degree of success. That, in turn, is perhaps an indication of increasing investor demand for new technology issues and a long awaited rebound in the market for Initial Public Offerings.
NetGear is a Santa Clara, Calif.-based company that designs, develops, markets and sells technologically advanced, branded networking equipment. Unlike many of its rivals that specialize in the large enterprise market, NetGear targets home markets and companies with 250 employs or less. According to the company’s web site (netgear.com), the company has so far sold over 17 million units and “as a result of NetGear’s brand name, the execution of its operating strategy and the growth in demand for networking products within small businesses and homes, the company has achieved net revenue growth each year since its inception in 1996.”
Investors eagerly bought shares of NetGear when shares debuted on Thursday. Lehman Brothers (LEH) led the IPO and priced seven million shares at the high end of the expected price of $12.00 to $14.00 a share. The price had been $10.00 to $12.00 a share, but Lehman Brothers raised the offering bid due to strong prepricing demand. Shares opened much higher than expected and started trading at $18.50 a share on the Nasdaq Stock Market Thursday morning.
One reason for NetGear’s warm reception on Wall Street probably owes to the fact that, unlike most IPOs so far this year, the company is profitable. In the first quarter, the company reported $67.7 million in revenues, which was up from $45.5 million last year. Furthermore, net income totaled $1.6 million, compared to a loss of $17.3 million last year. In short, the company’s operating profit in the first quarter may be one of the factors underpinning the successful IPO.
NetGear’s successful offering also comes on the heels of a period of strong performance in the networking sector. The nearby chart shows the one-year performance of the AMEX Networking Index ($NWX). The index, which tracks the performance of fifteen leading networking companies, has more than doubled since October of last year. The index is up nearly 40% during the past five months. Investors have been buying shares of networking companies on expectations that a turnaround in information technology spending is close at hand. Therefore, the sheer momentum within the networking sector is perhaps another factor underlying NTGR’s strong first day gains.
Some market watchers view NetGear’s successful debut as a sign of improving conditions in the new issues market. It was, in fact, the company’s second attempt at an IPO. The company filed to raise $130 million in September 2000, and just before the IPO market entered its long three-year slump. So the offering never took place. Now conditions are improving, however. This year, only eighteen companies have come to market. Eight have IPOs have taken place this month alone and the pace of Initial Public Offerings appears to be picking up. Going forward, if other offerings get warm receptions like NetGear’s, it will probably encourage more companies to return to the market and begin selling their shares to the public.
Frederic Ruffy
Senior Writer & Index Strategist
Optionetics.com ~ Your Options Education Site
Visit Fred Ruffy’s Forum
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