$1.1 billion IPO for Corvis sets investing highs


Corvis Corp., the fiber-optics equipment company based in Columbia, stormed Wall Street yesterday, raising $1.1 billion in its initial public offering, shattering all records set for IPOs of Maryland companies and setting a Wall Street record for a new venture without a dollar in revenue.

The 31 million shares in the company sold in the offering, which institutional investors got for $36 each, soared in their first day of trading, rising 135 percent to close at $84.7188, up $48.7188.

Earlier yesterday, Corvis' shares traded as high as $98.

Alex Benik, a fiber-optics industry analyst for the Yankee Group, a Boston consulting company, said the roar from Wall Street yesterday was no surprise.

"The fiber-optics sector is simply the hottest thing out there right now," he said. "There is enormous money flowing into these companies. The valuations are simply astronomical."

Corvis earned a first-day market cap of more than $11 billion.

As further evidence of the investor zeal for the company and its prospects to profit from the mushrooming need for fiber-optic equipment, the $36 offering price was triple the initial share price Corvis expected to get when it filed to go public in May.

On Tuesday, it filed an amended statement, saying it expected shares to price at $28 to $30. On Thursday, Corvis raised that again by $6 a share.

The offering made Corvis founder David Huber, 49, a billionaire on paper. After yesterday's market close, his stake in the company - more than 22 million common shares - was worth more than $1.86 billion. The IPO was the second big financial and business success for the optical networking wizard, who holds 41 patents on optical network inventions.

He was also a co-founder of optical network equipment maker Ciena Corp., based in Linthicum, which raised $122 million in its February 1997 IPO.

Huber bolted from Ciena that year in a management dispute. He started Corvis that August.

Corvis, which employs 475, makes equipment that converts data to light and can send it over long distances without it needing to be regenerated. Hence, say analysts, it holds the potential of lowering costs for fiber-optic communications networks.

Corvis has multi-year agreements with three fast-growing communications carriers, Broad- wing Inc., Qwest Communications International Inc. and Williams Communications Inc.

Broadwing and Williams, which each hold $20 million stakes in Corvis, have signed on to buy up to $200 million of Corvis equipment over the next two years if all field trials go well. Qwest, another potential $100 million customer, also is conducting field trials of Corvis equipment.

Company officials and financial underwriters of the offering are barred by Securities and Exchange Commission rules from commenting on the IPO.

But industry experts said the offering was such a smashing success because of several factors, despite the fact that the company reported in its IPO filing that it posted a $27 million loss on no sales for the three-month period ending April 1.

Analysts noted these factors driving Wall Street interest:

* Corvis has developed new equipment for transmitting data long distances over the Internet at lower costs;

* enormous spending by communications carriers for new networking equipment;

* last but not least, Huber's record: He helped lay the groundwork for Ciena as a powerhouse in the sector before departing.

"A lot of what's driving these big valuations in the sector has to do with the enormous growth that's being seen in Internet traffic worldwide. The carriers are spending millions to upgrade their networks to handle it," said Benik, the Yankee Group analyst.

"Also, Huber has a strong track record with Ciena, which has turned out to be quite a success story," Benik said.

RHK Inc., a market research company in San Francisco, estimates that sales of fiber-optic components will rise 75 percent this year to about $3 billion.

Fiber-optic equipment converts voice and data to beams of light so they can be zapped across hair-thin glass fibers.

Said Steve Catricks, an analyst with Blackrock Inc., "The future for Corvis looks pretty good. It will probably become a top-tier optical networking equipment company."

The Corvis IPO, managed by Credit Suisse First Boston, was the largest for a U.S. company with no revenue on the books, according to CommScan LLC, which has tracked such data since 1990.

Despite the first big day on Wall Street, Corvis faces a competitive landscape. Competitors include Ciena and heavyweights Nortel Networks Corp., Lucent Corp. and Sycamore Networks Inc., which raised more than $2 billion last year by going public.

Corvis, analysts said, must meet its first quarterly earnings estimates as a newly public company or face a cold shoulder from investors.

Also, Benik said, all eyes will be watching for how much equipment the three communications carriers that have signed deals for equipment actually buy.

While large for a young company with no revenue on the books, Corvis' IPO was not the largest of the year. AT&T; Wireless Corp. holds that title for its $10 billion offering in May, the largest IPO ever.

Still, if its share price holds up until a lockup period expires for executives selling some of their shares, it will make Huber and other executives, as well as early venture capital investors in the company, very wealthy.

Bloomberg News contributed to this article.

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