'Tis the Season to Raise Money

MARKET SHARE Bob Starzynski

'Tis the Season to Raise Money

Take a minute to scan the charts to the left of this column. Notice anything about those closing stock prices?

It doesn't take Alan Greenspan to tell you many companies, both on and off this list, are near their 52-week highs. Considering all of the talk about the Dow Jones Industrial Average breaking the inconceivable 9,000 barrier, it is not surprising investors are eagerly trading up the prices in their portfolios.

But investors are not the only ones capitalizing on this Wall Street excitement. Companies themselves are taking advantage of a strong bull market.

Over the past two months, more than one-third of the companies on the Washington Technology stock chart have raised money publicly or announced their intentions to do so. That number is truly shocking.

In typical times, a group like these integrators, distributors and resellers may include a handful of money seekers. But 13 out of 34?

We're not talking about XYZ Corp. securing a bank credit line of $50 million, either. Many of these companies are rounding up $200 million or significantly more in equity and debt.

While the number of shoppers is surprising, the timing is not. Publicly held companies generally go the markets for money on two occasions. Either they are really strapped for cash and need a "hit" of working capital, or times are great and they want to stockpile their piggy banks.

With technology companies, the former reason is more common. Many tech companies bleed red ink and need public money to carry them through the developmental phase and into profitability. The most simple way to recognize these types of offerings is to look at the company's bottom line. If it is not making money, then it needs to raise capital.

That aside, most of the companies to the left are not hurting much. Most are healthy - stock prices are on an upward trend, revenue and profits are increasing steadily from one quarter to the next. Investors are happy, so it's time to hit them up for more money. It is thus understandable that IT companies are looking for money even if they are doing well.

In some instances, the offerings are being made by large shareholders and not the companies themselves. They want to cash out at a 52-week high, just like the rest of us.

But when it's the company seeking the money, several reasons come into play. Cash helps IT companies with those ever-popular acquisition sprees or mounting research and development costs. And with a widening labor shortage, it is costing the companies more to recruit proper talent.

Enough said.

Here's the lowdown on who's filling their coffers.

According to documents filed with the Securities and Exchange Commission: Affiliated Computer Services sold $230 million in convertible subordinated notes last month; Bell Atlantic filed a prospectus March 30 to raise $893 million by selling a class of medium-term notes; Condor went public in February with a $76 million offering; Harris sold $150 million worth of bonds in February; IBM issued $100 million in medium-term notes April 1; Keane is trying to sell almost 200,000 shares in a secondary offering; Litton raised $300 million in convertible bonds at the beginning of this month; TRW filed a prospectus in late March to raise $1 billion through the sale of debt securities, warrants and common stock; Unisys issued $200 million in senior notes Jan. 30; Vanstar filed in early March to sell 4 million preferred securities; shareholders of Wang sold 2.9 million shares last month; MicroAge sold 1 million shares last month; and Savoir is putting together a secondary offering of 4.5 million shares.

Most of these companies are performing well on the public markets, so why not hold out a hand for more?

For questions, comments and suggestions, contact Bob Starzynski on the Internet at bobs@technews.com.


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