Investors await two wireless IPOs

After a holiday lull, the market for initial public offerings should roar back to life next week with the debut of two wireless companies.

724 Solutions, which allows banks to offer wireless services to customers via digital mobile phones and pagers, and interWave, an equipment provider for wireless communications, are expected to sell their shares mid-week. Because the market for wireless stocks is red-hot, the IPOs could post stellar first-day gains.

"The keyword here is wireless, wireless, wireless," said Richard Peterson, an IPO analyst with Thomson Financial Securities Data. "Qualcomm has been an explosive stock and if it serves as a proxy for the wireless industry, these stocks should have tremendous run ups."

Qualcomm, a wireless software and chipset company, was the best-performing stock in the Standard & Poors 500 last year, posting an astounding 2,600 percent gain.

The company led the way among wireless stocks as the industry benefits from a surge in sales that has resulted from two trends: The price of service is declining and network coverage is expanding around the world.

Research firm In-Stat Group predicts 9 million business customers will be using wireless data services within three years, up from 784,000 last year.

724 and interWave represent the early wave of wireless IPOs this year--but not the largest. AT&T's mobile phone division may fetch up to $10 billion when AT&T sells a 20 percent stake to the public as a tracking stock.

724 Solutions hopes to raise up to $78 million, based on the high end of its $11 to $13 pricing range and the 6 million shares it expects to sell. The company, which is being underwritten by Credit Suisse First Boston, expects to sell the shares to institutional investors Tuesday and begin public trading Wednesday under the ticker "SVNX."

The company generated $2.1 million in revenues during the first nine-months of last year, up from $1.3 million in the previous year. Its net loss grew to $1.3 million in the period from a loss of $333,000 a year earlier.

724 already has received large investments from some customers. After the IPO, Citigroup will hold an 18.1 percent stake; Bank of Montreal, 9.7 percent; Bank of America, 9 percent; and telecom company Sonera, 18.1 percent. These customers will represent a total ownership of 54.9 percent.

With its customers as its major shareholders, the company's revenue source is fairly stable, said IPO analysts.

"The customers who own the stakes basically support 724's business model," said Jeff Hirschkorn, senior analyst with IPO.com.

Meanwhile, interWave is also expected to be a strong performer. The company sells compact wireless communications systems that use the global system for mobile communications (GSM) standard. These systems allow employees to connect to their company's private telephone network via wireless devices.

"Their products are installed in nearly 20 countries and have a global presence," said Hirschkorn. "And similar to 724, some of their customers are major investors."

If it exercises all its warrants, Nortel Networks will own 22.4 percent of the company. Meanwhile, Nortel also accounted for 18 percent of interWave's revenues for the quarter ending Sept. 30.

The company generated $5.4 million revenues during the September quarter, up from $4.5 million the previous year. Meanwhile, interWave's net loss jumped to $9.5 million in the period, compared with $5 million the prior year.

interWave hopes to raise up to $80 million, based on the high end of its $8 to $10 pricing range and the 8 million shares it plans to sell. The company expects to price its shares Wednesday and begin public trading Thursday under the ticker "IWAV." Salomon Smith Barney is the lead underwriter.

Other offerings that are expected to do well next week include Neoforma, a business-to-business company. Neoforma shares were expected to sell this week but the offering was delayed after it increased its price range.

Neoforma bumped up its price range to $10 to $12 a share from $8 to $10. The company hopes to raise up to $84 million, based on the high end of its range and the 7 million shares it will offer. The company plans to price its shares Monday and will trade under the ticker "NEOF."

Extensity, a company that allows companies to handle much of their paperwork online, also is scheduled to sell its shares next week.

Extensity also increased its price range by a sizable 75 percent. The company raised the range to $14 to $16 a share from $8 to $10 a share, and hopes to raise up to $64 million by selling 4 million shares. The company expects to price its shares as early as Monday and begin trading Tuesday under the ticker "EXTN." Deutsche Banc Alex. Brown is the lead underwriter.

"Extensity hikes its range to $14-16, (that's a) sign a moonshot is on the horizon," Hirschkorn said.

He added that the company has attracted such customers as Cisco Systems and BEA Systems.

Last year, Extensity generated $3.2 million in revenue in the December quarter, compared with $402,000 the previous year. Its net loss rose to $7.6 million for the period from a loss of $3.7 million a year ago.