Spansion IPO receives warm welcome from investors |

Spansion IPO receives warm welcome from investors

WASHINGTON – A money-losing semiconductor company stole the show in IPO trading Friday, as investors flocked to Spansion Inc.’s stock.In afternoon trading, shares of Spansion, a Sunnyvale, Calif.-based maker of flash memory, were at $13.50, up 12.5 percent on the Nasdaq Stock Market from its offering price of $12 a share.Spansion, a subsidiary of Advanced Micro Devices Inc., sold 42.2 million shares of Class A stock at $12 a share, below the original expected range of $16 to $18.Spansion, which has been on a money-losing streak since 2004, saw its sales drop by nearly 40 percent in the first nine months of 2005 as its selling prices declined.Its net losses widened to $257 million, compared with a net loss of $20 million in the same period of 2004. The company, which both designs and manufactures semiconductors, carries a heavier load of fixed costs and capital spending requirements than design-only chipmakers.Spansion specializes in a type of memory known as NOR flash, which has experienced excess supply and falling prices this year.The company is focusing on a new type of technology it calls ornand that it expects to begin producing in the first half of 2006.Spansion plans to sell both NOR and ornand to its customer base of cellphone manufacturers, and is “very, very bullish” about its outlook for the combination, Chief Executive Bertrand Cambou told reporters during a conference call.Two other companies that began trading after IPOs, ambulance and hospital staffing specialist Emergency Medical Services Corp. and auto technology company Directed Electronics Inc., slipped in trading Friday.Greenwood Village, Colo.-based EMS company Friday afternoon was at $13.60, down 3 percent on the New York Stock Exchange from its offering price of $14.EMS sold 8.1 million shares of its Class A stock at a price below the expected $15 to $17 range.EMS reported its net revenue rose 10 percent to $1.2 billion in the eight months that ended in September, compared with the same period of 2004.Net income declined 42 percent to $14 million as EMS’ interest expense nearly quadrupled.The rising interest is directly attributable to the debt that EMS took on when private-equity investor Onex Partners LP and Onex Corporation purchased it from Laidlaw International Inc. in February 2005 for $828.8 million. EMS plans to use $100 million from its IPO proceeds to pay down some debt.Directed Electronics, known for its Viper auto security system and for marketing Sirius satellite radio systems, was trading Friday afternoon at $15.14 a share, down 5 percent from its offering price of $16 a share. The Vista, Calif., company sold 9.38 million shares at the midpoint of the expected price range.Directed Electronics, which had been owned since 1999 by private-equity investor Trivest Partners, reported net sales rose 54 percent in the first nine months of 2005, but net income declined 12 percent to $5.99 million compared with the same period of 2004.Sales rose in 2005 after the company expanded into satellite radio products and Definitive Technology home audio products in the late summer of 2004. The company’s net income was hurt by rising interest expense in 2005; Directed Electronics took on more debt and paid out a special $109 million dividend to its private shareholders in June 2004, though it has no plans to pay dividends to new stockholders as a public company. It’s using the majority of the proceeds from its IPO to pay down debt.Directed Electronics’ prospectus contained a warning about a material weakness in its staff’s proficiency with U.S. GAAP accounting, and it had to restate three years of financial data after problems were found in its revenue-recognition process. The company said it is developing a plan to address its accounting weaknesses, but can’t guarantee that will succeed in fixing the problem.Vail, Colorado

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