High-Tech Is Not Completely Dead

Just when it seemed like the Nasdaq was staging a comeback,
Nortel shocked Wall Street.
Once a darling of mutual funds and momentum traders, Nortel’s stock fell
more than 30% on Friday, erasing more than $30 billion in market cap.

For the first quarter, the company said it will see a loss of four cents per
share instead of an expected profit of 16 cents per share. Revenues are
expected to fall from an expected $8.1 billion to a dismal $6.3 billion. In
fact, the company announced that it believes the problems will last through
the fourth quarter of 2001. The company called it a “severe economic
downturn.” The company plans to slash 10,000 workers.

No question, the economy is slowing substantially. And, if such companies
as Nortel cannot stop from plunging, how can upstart IPOs survive in this
tough environment?

There was only one IPO last week. It was
Riverstone Networks .
The company develops high-end routers for Internet Service
Providers (ISPs). The products focus on the metropolitan-area
communications networks. In fact, it was the first high-tech deal for 2001.

For the first nine months of 2000, revenues were $63.1 million, which was up
from $10.3 million in the same period a year ago. Although, the company
suffered losses of $59.2 million for 2000.

The initial price range was $12-$14, but the lead underwriter, Morgan
Stanley, had to reduce it to $11-$13. The IPO was priced at $12.00, issuing
10 million shares. The IPO opened at $13.50 and closed at $13.06. That
gives the company a market cap of about $1.6 billion.

Another company,
OMP, was
expected to go public last week – but had to postpone its offering because of
adverse market conditions. The company develops high-end skin treatments.

This Week

And don’t expect much from the upcoming week, either.

The main offering will be from the Chinese government. The IPO is the
China National
Offshore Corporation
(CNOOC for short). Yes, as the name implies,
the company is in the oil and gas exploration industry. And, it is the
big player in China.

Last year, the company had $1.8 billion in revenues and the profits were
$497 million. In all, the company has net proven reserves of 1.8 billion
barrels of oil equivalent.

The company plans to issue 1.6 billion shares between $13-$16 per share.
The lead underwriter is Merrill Lynch and the proposed ticker symbol is CEO.
After the IPO, the Chinese government will own about 72.5% of the company’s
outstanding shares. Actually, this will be the second billion-dollar IPO
for the year (the other one was KPMG).

But because of its large size, do not expect a big premium.

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