IPO of Riverbed Posts 57% Surge For Year's Second-Best Debut

By Lynn Cowan

A technology stock ruled the market for initial public offerings of stock, with shares of Riverbed Technology Inc. rising 57% on their first day of trading, the second-best debut this year.

The performance of Riverbed, which raised less than $100 million in its public stock sale, was the best since shares of Chipotle Mexican Grill Inc. in January doubled in price on its first day of trading, according to deal tracker Thomson Financial.

Riverbed yesterday outshone a far larger $1.06 billion offering from pharmaceutical company Warner Chilcott Ltd. It also outpaced a smaller deal from medical-device maker Home Diagnostics Inc. All three stocks trade on the Nasdaq Stock Market.

Riverbed stock closed at $15.30 a share in Nasdaq composite trading at 4 p.m., up from its IPO price of $9.75 a share. A total of 8.8 million shares were sold at above the expected range of $7 to $8.50 a share.

Riverbed is a San Francisco maker of network-infrastructure products for computer systems. It is a fast-growing market, and Riverbed's revenue has increased rapidly since it was formed in 2002. For the first six months of this year, its revenue rose sixfold from the year earlier to $31.8 million, as the company gained new customers and sold more equipment to existing customers.

But Riverbed is still a young company that is in the process of building up its sales and marketing force, so its expenses are outpacing revenue growth. Its net loss in the first half widened to $10.3 million, compared with $8.3 million in the first half of 2005.

Warner Chilcott had a less-noteworthy debut. Its shares ended their first day of trading at $14.95, off an IPO price of $15. The company, based in Bermuda, sold 70.6 million shares of stock at a price below its expected range of $17 to $19 a share.

Warner Chilcott develops pharmaceuticals that focus on women's health care and dermatology. One of its specialties is in hormone therapy, which has become the focus of research that warns of increased medical risks, and the company says in its prospectus that such warnings may reduce its revenue growth.

Warner Chilcott has reported net losses since 2005, when it was acquired by a consortium of privateequity firms. The company, which was a unit of Warner-Lambert Co. until it was sold to an Irish firm in equity firms. The company, which was a unit of Warner-Lambert Co. until it was sold to an Irish firm in 1996, was acquired for $3.1 billion in January 2005 by private-equity specialists Bain Capital, DLJ Merchant Banking, J.P. Morgan Partners and Thomas H. Lee Partners.

Warner Chilcott's offering is the second-largest U.S. IPO this year, behind MasterCard Inc.'s $2.4 billion debut in May. It is also the largest private-equity-backed offering this year, according to data tracker Dealogic.

Home Diagnostics showed a modest gain, closing at $12.50 a share, up 4.2% from its IPO price of $12. The Fort Lauderdale, Fla., company sold 6.6 million shares at a price below its expected range of $14 to $16 a share. Home Diagnostics, which makes glucose monitoring equipment, serves an expanding market, thanks to the increasing number of people who are diabetic. It sells its monitoring systems both under its brand and for other customers' brands. The company has been profitable since 2002.

Goldman Sachs Group Inc. was the lead manager on both Riverbed and Warner Chilcott's IPOs. J.P. Morgan Chase & Co. managed the Home Diagnostics offering.

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