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inSilicon Jumps but PartsBase.com Slips in Debuts

Kevin Max

Updated from 2:51 p.m. EST

Two issues made their debuts in the stock market Wednesday with vastly different results.

Telecommunications chip component maker inSilicon (INSN Quote - Cramer on INSN - Stock Picks) almost doubled in its first day of trading, while business-to-business player PartsBase.com (PRTS Quote - Cramer on PRTS - Stock Picks) fell from its starting price, hinting that the brief love affair with this sector may be coming to a close.

Shares of inSilicon surged 9 1/2, or 79%, to close at 21 9/16 Wednesday, after reaching a high of 25 1/2.

Individual investors appeared to be more enthusiastic about the inSilicon offering than institutional investors as the initial offering price was relatively weak. The company, with lead underwriter Robertson Stephens, set the initial price at $12, up from the range of $9-$11, raising $42 million on the sale of 3.5 million shares.

inSilicon, based in San Jose, Calif., designs semiconductors for use in cell phones, network routers and other devices for such customers as Intel (INTC Quote - Cramer on INTC - Stock Picks), Lucent Technologies (LU Quote - Cramer on LU - Stock Picks), Advanced Micro Devices (AMD Quote - Cramer on AMD - Stock Picks) and Motorola (MOT Quote - Cramer on MOT - Stock Picks).

Revenues and margins more than doubled between the years ending Sept. 30, 1998, and Sept. 30, 1999. Sales more than doubled to $19 million from $8.8 million in that period, while net losses increased to $12.1 million from $7.1 million. The company made almost 80% of those revenues from licensing its technology, with the rest coming from services.

inSilicon is a subsidiary of Phoenix Technologies (PTEC Quote - Cramer on PTEC - Stock Picks), which owns 53% of inSilicon shares.

Meanwhile, PartsBase.com caught business-to-business investors by surprise Wednesday, falling 1 15/16, or 15%, to close at 11 3/8, after trading as low as 10 11/16.

PartsBase.com's relatively small offering of 3.5 million shares was notable for coming in within the original expected range, suggesting that institutional demand was not as strong as it was for PartsBase.com's B2B predecessors. With lead underwriter Cruttenden Roth, the company set the initial offering price at $13, at the top of the primary range of $11-$13, and brought in $45.5 million.

The company said it would use $7 million of the proceeds for sales and marketing and an additional $5 million for upgrades to hardware and software.

The provider of Internet e-commerce services for the aviation industry helps customers buy and sell new, used and overhauled parts and products. PartsBase.com boasts more than 13,000 members including Boeing (BA Quote - Cramer on BA - Stock Picks), Honeywell (HON Quote - Cramer on HON - Stock Picks), Federal Express (FDX Quote - Cramer on FDX - Stock Picks) and United Parcel Service (UPS Quote - Cramer on UPS - Stock Picks), and serves more than 115 countries. Aerospace Industries Association estimates that total exports and imports of aircraft parts and products were approximately $29 billion in 1999, according to Partsbase.com's registration with the Securities Exchange Commission.

The idea behind B2B procurement is to automate the search and bid request process. It allows buyers to identify sellers with inventory that matches their needs and then send out bid requests online. Through increased exposure to sellers and pricing information, companies can then save time and money locating and buying parts and products.

In 1999, the company made $362,224 in revenues and incurred a net loss of $7.8 million. Almost all of the firm's revenue comes from member subscription fees.

The company believes it can boost revenue over time to include fees for classified advertising as well as from more banner advertisements.

Although the Boca Raton, Fla.-based company noted that it periodically backs up its databases with tapes and stores the backup tapes offsite, PartsBase.com has not maintained a redundant site that would make it less vulnerable to system crashes and computer hacking.

Chief Executive Robert Hammond owns about 64% of the outstanding shares after the offering, making a takeover bid inherently difficult down the road.