November 10, 2003 Tech Companies Tiptoe Back Into The IPO Market By Steven Marlin Leaving the dot-gone experience behind, investors are cautiously embracing initial public offerings by technology companies. Nine of the 39 companies that have gone public this year are IT firms, according to Renaissance Capital, a research firm that tracks IPO performance. Two other companies, Callidus Software and Tessera Technologies, are expected to do so this month. And five tech companies--FormFactor, Digital Theater Systems, SigmaTel, iPayment, and iPass--are among the 20 top-performing IPOs this year. The time is ripe for IPOs, says Paul Holland, a partner at venture-capital firm Foundation Capital. A company that Foundation seed-funded, wireless LAN vendor Atheros Communications Inc., is expected to file an IPO registration shortly. Big Winners Top-performing tech IPOs of 2003 Company IPO YTD Return SigmaTel Sept. 93% FormFactor June 86% Digital Theater Sys. July 70% iPayment May 46% iPass July 33% Data: Renaissance Capital Companies cite favorable market conditions, the need to raise additional capital, and the prestige of going public as key factors in their decision to launch an IPO. IPass Inc., which sells software to connect remote workers to company networks, has posted a 33% return since going public in July. The company wanted to raise its visibility among large corporate customers, says Bryan Parker, director of investor relations. The market is a far cry from 1999, when 486 companies went public, the bulk of them tech firms. This time around, the mix is weighted toward non-IT industries such as financial services, capital equipment, and biotech, says Kathleen Smith, portfolio manager at Renaissance Capital. Another tech company that entered the IPO ranks this year is Netgear Inc., a provider of networking equipment for small businesses and consumers that went public in May. It used a chunk of the $110 million it raised to pay off a loan to Nortel Networks; the rest will be used to finance growth, CEO Patrick Lo says. Ron Edgerton, CEO of audio-chip maker SigmaTel Inc., says the company went public in September because corporate customers such as Dell, Samsung, and Sony prefer dealing with large companies and because the market was showing good indications. "You never know when that market window is going to close," Edgerton says. SigmaTel's IPO has recorded a return of 93%, the fourth-best among IPOs that were priced this year. Meanwhile, rumors are swirling of an IPO by search-engine company Google. Company officials reportedly have held discussions with bankers but haven't announced any plans. Article URL: http://www.informationweek.com/story/showArticle.jhtml?articleID=16000652