graphic
News > Deals
Agere edges up in debut
March 28, 2001: 4:46 p.m. ET

Lucent microelectronics unit up only pennies; warns of fiscal '01 loss
graphic
graphic graphic
graphic
NEW YORK (CNNfn) - The huge $3.6 billion offering from Agere Systems Inc. managed a tiny premium Wednesday, an uninspired performance for the year's biggest IPO.

Agere, the microelectronics unit of Lucent Technologies, opened at $6.05 and hit a high of $6.14 before falling. Agere shares closed up 2 cents to $6.02 in its debut on the New York Stock Exchange. Shares of parent firm Lucent (LU: Research, Estimates) dropped $1.43 to $10.27 Wednesday.

Investors were snapping up shares of Agere, however. More than 130 million shares changed hands, making Agere the second-most traded New York Stock Exchange stock during a single session. Lucent holds the record. On Jan. 27, 2000, 136 million Lucent shares traded.

After revising its deal three times, Agere late Tuesday finally sold 600 million shares at $6 apiece via lead underwriter Morgan Stanley Dean Witter. The company had planned to sell the 600 million shares at $6-to-$7 each. 

graphicA struggling broad market have put the stops on new issues this year, with the IPO market nearly shutting down in first quarter. Excluding Agere, only 18 initial public offerings have priced so far this year, raising $4.5 billion, compared to 133 new issues last year during the same time period, raising $27.8 billion, according to data from CommScan, a New York based investment banking research firm.

On Tuesday, another warning from Nortel Networks Corp. (NT: Research, Estimates) further dimmed hopes that the Agere IPO would perform well. Agere itself also warned Wednesday, saying in an SEC filing that softening customer demand and lower order volume may result in a "significant operating loss" for fiscal 2001.

The Nortel warning helped send U.S. stocks tumbling Wednesday. The Dow industrials skidded 162.19 points, or 1.6 percent, to 9,785.35, following three days of gains. The Nasdaq composite index dropped 118.34, or 6 percent, to 1,853.92, while the S&P 500 lost 28.92 to 1,153.25.

"The fact that Morgan could raised $3.6 billion in this type of market is a good sign," said analyst Mike Falbo, of IPOpros.com. "It's actually to their credit that Agere is trading above the IPO price."

And the fact that Morgan could float such a huge offering in a tough market may mean that underwriters will begin searching for deals they can launch, Falbo said.

"The fact that Agere is up a fraction when the Dow is down so sharply  indicates some interest in the IPO," said market strategist Richard Peterson at Thomson Financial Securities Data.

The Agere IPO now ranks as the sixth-largest U.S. based offering, behind Goldman Sachs (GS: Research, Estimates) $3.7 billion float but ahead of Lucent's $3.5 billion deal, according to updated figures from CommScan.

"Lots of underwriters are looking to this deal as a bellwether. Morgan raised $3.6 billion in one of the toughest IPO markets we've seen. This is pretty significant," said IPOpros.com's Falbo.

Agere loss in 2001

Allentown, Pa.-based Agere (AGR.A: Research, Estimates) designs and makes optoelectronic components for communications networks and integrated circuits for computer equipment, and is a leader in sales of communications semiconductors.

Agere will assume $2.5 billion in Lucent debt, the company said in an SEC filing. The Lucent unit said it is experiencing softening customer demand for it s optoelectronics components and integrated circuits and expects second quarter fiscal revenue to be well below first quarter's.

Agere said its revenues in fiscal 2001 will be on par with the $4.7 billion it posted in fiscal 2000. Agere, whose parent Lucent is also its biggest customer, said it may record a significant operating loss in 2001, due to softening demand and the economic downturn, but did not say if losses would be more than the $76 million it recorded  in fiscal 2000.

Parent firm Lucent will be spinning out the unit after the IPO and Agere no longer will be a wholly owned subsidiary. Lucent plans to distribute all the shares it owns to shareholders by Sept. 30. After the IPO, Lucent will hold 63.3 percent Class B shares and 87.3 percent of voting power.

Lucent is under pressure to pay off a heavy debt load that compelled it to launch the initial public offering of Agere despite the poor market for new offerings, analysts have said.

Lead underwriter Morgan Stanley has an option allowing it to buy and then sell 90 million Agere shares, after the IPO, in exchange for some Lucent debt.

Murray Hill, N.J.-based Lucent had $8.1 billion debt outstanding as of Dec. 31, the company said in an SEC filing. Morgan now owns only about $1.6 billion in Lucent debt but will reduce that debt by about $565 million if it exercises the over-allotment option. graphic





graphic

Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer. Morningstar: © 2018 Morningstar, Inc. All Rights Reserved. Factset: FactSet Research Systems Inc. 2018. All rights reserved. Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor's Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2018 and/or its affiliates.

Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer. Morningstar: © 2018 Morningstar, Inc. All Rights Reserved. Factset: FactSet Research Systems Inc. 2018. All rights reserved. Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor's Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2018 and/or its affiliates.