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Updated from July 15

Shares of

Freescale Semi


were rising Friday in their first day of trading, bucking a decline in the broader chip index. But underwriters were forced to sharply cut the IPO price of Freescale shares to $13, reflecting soft Wall Street demand for the issue.

In a June filing, Freescale had outlined plans to sell 121.6 million shares priced in the range of $17.50 to $19.50. Thursday evening, underwriters led by Goldman Sachs, Citigroup and J.P. Morgan priced 121.6 million shares at $13, raising $1.58 billion.

On its first day of trading on the Big Board, the stock was recently up 63 cents, or 4.9%, to $13.63. The Philadelphia Stock Exchange Semiconductor Index was off 1.2% to 413.67.

Sal Morreale, who tracks IPOs for Cantor Fitzgerald, said the deal came to market "at an attractive price where investors got involved. It really wasn't put into a lot of what we call 'flippers' hands. But it shows you that in an environment like this, the institutional investors are going to mandate the pricing." (Cantor Fitzgerald does not have a stake in the IPO.)

The offering is not being well-received because of its unfortunate timing, he said, noting disappointing news this week from giant


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. A Merrill Lynch sector downgrade also soured sentiment on the chip sector.

Had Freescale been going public six months or a year ago, it would have been a different story, he said. "You have a real hard week in that sector," Morreale said. "The timing of the deal is tough."

Worsening matters, analysts at both Sanford Bernstein and Fulcrum issued decidedly unenthusiastic research notes on Freescale prior to the IPO pricing Thursday evening.

Freescale, which sells chips used in autos, networking and wireless communications, has only recently returned to the black after posting multibillion-dollar losses in the early 2000s.

In a harsh note on Tuesday advising investors to steer clear of Freescale shares, Sanford Bernstein's Adam Parker said the IPO "is not designed so much to unlock hidden value in the semiconductor business as to remove an underperforming business from the parent company."

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Parker said Freescale isn't a convincing turnaround story, despite manufacturing and labor restructurings. He expects the company to have to boost its R&D investments and spend more money promoting its brand name to attract new customers as it shifts away from its heavy reliance on Motorola, which accounted for nearly a quarter of revenue last year

Moreover, he expects Freescale to post long-term growth of only around 6%, trailing projected semiconductor industry growth of 8% to 10%.

Fulcrum Global Partners' Clark Fuhs was similarly unenthusiastic on Freescale's prospects. "Our annual growth assumption for Freescale in 2004 is 21% and just over 10% in 2005, slightly below our forecast for the overall industry. We would note that the company is in a set of markets that have lower growth profiles, or are heavily dependent on Motorola," he wrote.

Fuhs said turning Freescale into a growth company will be a "challenge for management."

Neither Sanford nor Fulcrum offer investment banking services.

Besides the fairly negative outlook on Freescale and the chip sector, the IPO market has lately been under pressure. A trio of other IPOs that debuted this week, including

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Phase Forward


, have all seen their prices cut. On Thursday, LG Phillips LCD said it will lower the number of shares in its planned offering by 25%,


reported. The company is a joint venture between LG Electronics and

Philips Electronics

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"The way IPOs are coming to market today is being dictated by institutional buyers at reduced prices, but they are getting it done," said John Fitzgibbon, editor of the IPO site

A Motorola representative was not immediately available for comment.'s Ronna Abramson contributed to this report.