January 29, 2002 1:30 PM PST

Touch pad maker as IPO touchstone

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A maker of touch pads for laptop computers kicked off the first public offering of the year Tuesday, rising 19 percent and giving investors a glimpse into what kind of year 2002 will be for IPOs.

Shares for San Jose, Calif.-based Synaptics, closed at $13.11, up from the $11 price set Monday night. That price was at the top of its previously announced range of between $9 and $11. The stock soared 24 percent above its opening price earlier in the day.

The offering's underwriters include Bear Stearns, SG Cowen Securities and SoundView Technology.

"This is definitely a much-anticipated offering because everyone wants to have a feel for what will happen this year," said Tom Taulli, analyst with NetCap Ventures in Newport Beach, Calif. "This company has a great product, good management and products, and a profit. The old-fashioned fundamental analysis looks good. If this doesn't work, what will?"

The company said it intends to use the money for sales and marketing activities and to pursue strategic relationships and acquisitions, along with general corporate purposes.

Synaptics originally filed to go public last February, but pulled back amid a depressing IPO market. It also lowered the range of the offering earlier this month.

"They basically had to wait for the market to become accommodating," said Steven Tuen, an analyst at IPO Value Monitor. "They're the first this year, so how well this deal performs could set a tone on the other deals that follow."

Synaptics recorded sales of $26.4 million for the quarter ended Dec. 31, up 43 percent from the year-ago quarter. It posted a net profit of $2.8 million for the quarter, compared with a net loss of $184,000 the year before.

The company had $10.6 million in cash and cash equivalents on hand at the end of the quarter.

Synaptics dominates the touch pad industry, saying it controls 61 percent of the market. Its customers are most of the major players in the notebook business, including Acer, Apple Computer, Dell Computer and Toshiba.

Generally, the company sells its products through contract manufacturers, which resell the touch pads to laptop makers. Two contract manufacturers, Quanta and Nypro, accounted for 43 percent of its net revenue in fiscal 2001.

Synaptics hopes to expand into the handheld business; it has been working on touch screens for handhelds and outdoor displays. Both products are expected to be shipped this year.

Synaptics' fortunes are tied to the PC market, which could cause some investors to be skittish, said Tuen, who added that he expects the company to do well on its opening day.

"Overall, the notebook computer market is expected to grow faster than the overall PC market, so they're not as negatively viewed by investors," he said. "I think...they're probably close to fair value because even though they're growing faster than the PC market, it's still relatively slow growth."

 

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