RealTime IT News

F5 Networks, Juniper Defy Gravity

In mid-July we saw that shares of most Internet companies which had launched IPOs in the previous three months - 45 of 75, or 60%, to be exact - were trading above their respective first-day closing prices.

That, however, was just at the beginning of the mid-summer swoon which dragged Internet stocks well into August, and may not be over yet, despite last week's mini-rally.

Based on this monthlong slump, I expected the latest after-market figures, as reflected in internet.com's IPODEX, to have a much redder hue to them.

But they don't. In fact, 47 of the 86 listed in the IPODEX ended trading Friday above their first-day closing price. That's 55%, just slightly off the pace in early July, when the market was hotter, and substantially better than the 30% (17 of 57 companies) in June, when the spring slump was in full swing.

Below is a list of the best-performing Internet stocks issued since June, along with their IPO date (full details are in IPODEX):

  • F5 Networks (June 4) - 269%
  • HotJobs.com (Aug. 10) - 142%
  • Stamps.com (June 25) - 134%
  • Software.com (June 24) - 126%
  • Juniper Networks (June 25) - 109%
  • Viant (June 18) - 88%
  • Mail.com (June 18) - 83%
  • Digital Island (June 29) - 82%
  • GoTo.com (June 18) - 78%
  • CyberSource (June 24) - 77%

There are two remarkable stories here. One is F5 Networks (FFIV), a vendor of server load-balancing software. The Seattle-based company's stock easily had the best after-market performance of all recent Internet issues through July 9, trading at $50.75, or 241% above its first-day closing price of $14.88.

As of Friday, F5 shares were even higher, closing at $54.88. That slight increase is deceiving, for F5 went on a wild ride between July and August, closing as high as $71.25 on July 15 before plunging to as low as $29.88 by Aug. 9. One week later, F5's shares were at $59, nearly doubling in a week.

The other fascinating story comes from Juniper Networks, which is now the only Internet stock trading above $200 per share. Juniper earned its 109% after-market performance through Friday the hard way: The Internet backbone router vendor had one of the best debuts of 1999, closing on June 25 at $97.88 after being offered at $34 a share.

It has performed even more impressively since closing on July 9 at $132.75, cracking the $200 barrier on Aug. 13 and reaching its all-time high Monday of $225.25.

Obviously both companies are benefiting from the market's affinity for infrastructure plays. A Wall Street Journal article last week said that 94 non-retail Internet companies were up about 71% from their offer prices, compared to a 28.3% average gain for 40 online retailers, based on a study by Thompson Financial Securities Data.

But Kenneth Heebner, a portfolio manager for Capital Growth Management, rightly told the Journal that investors are taking a chance because they're betting as if they think all infrastructure companies will be winners.

That's a risky assumption when you're talking about a company like Juniper, which competes directly with the 800-pound gorilla of networking, Cisco Systems.

For now, though, I'd feel pretty good if I were a Juniper investor. Ijust wouldn't buy in now.

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