Searching for a Big Technology IPO

Google may be looking to go public early next year. Also: Nortel restatement means lower losses; judge declares mistrial in Quattrone case; Dana's takeover defense pays dividends; top Seagate shareholders pledge not to sell; and more.

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Search company Google has embarked on a big search of its own, reported Reuters, citing people familiar with the situation.

The Mountain View, California-based company is contemplating an initial public offering for the first half of 2004, and it has already winnowed a field of 35 banks to a dozen or less, according to the wire service. The identities of these firms is unknown; a Google spokesman declined to comment to Reuters.

One person cited by the wire service said that Google is aiming for a valuation of about $16 billion. By comparison, Yahoo’s market capitalization is about $26 billion; Amazon’s, about $22 billion.

Kleiner Perkins and Sequoia Capital — two venture-capital firms — and Stanford University were early investors in Google and would do very well by an IPO. It’s too early to know what percentage of Google shares would be offered to the public.

Some observers suggest that in the wake of the recent IPO of gift retailer Red Envelope Inc. and the pending IPO of travel company Orbitz, a large offering like that contemplated for Google could provide a shot in the arm to reinvigorate Silicon Valley.

Nortel Restatement Means Lower Losses

Nortel Networks said it plans to restate its results for the past three years and the first two quarters of 2003.

The telecom equipment maker said it will reduce net losses for 2000 through the first two quarters of 2003 and reverse $900 million in liabilities carried on its June 30, 2003, balance sheet. This will result in an increase in shareholders’ equity and net assets previously reported on the June 30, 2003, balance sheet.

The company also said that $92 million in revenue should have been deferred to later periods.

The restatements stem from an asset and liability review and other related reviews, which are ongoing, according to the company. The Brampton, Ontario-based company added that none of the adjustments will impact its cash balance as of June 30 and that it does not expect the adjustments to affect its future business operations.

Chief financial officer Doug Beatty told Reuters that the size of the restatement should be judged in the context of Nortel’s combined $31 billion loss in 2001 and 2002 and the fact that it cut about 60,000 jobs, or two-thirds of its staff.

Beatty added that almost half of the liabilities to be reversed concern restructuring provisions to cut Nortel’s staff from a peak of about 95,000 employees and reduce its facilities from just over 700 sites to about 250.

“You have to estimate what you think all those costs are going to be at the time that you actually notify an individual or get out of building,” he told Reuters in an interview. “Clearly you want to make sure you’ve got it covered so [you] tend to probably estimate on the upper end of a range.” Added Beatty: “On the restructuring side, the actual amount currently estimated and still preliminary that we’re going to put back only represented 7 percent of the amount that was originally approved. Another way of looking at it is we got it 93 percent right.”

He told the wire service that another major element of the restatement is contractual liabilities, which involve costs for network installation projects around the world. “It turns out again those costs were overstated,” said Beatty. “They were accrued through those years. And a restatement by definition means take it back to the year that you actually recognized it as an expense and take it off the books then.”

Ultimately, said Beatty, his goal is to make the restatement as transparent as possible, and that investors should remember that Nortel plans to reduce, not increase, the losses of past years.

On Friday, Standard & Poor’s said Nortel’s ratings and outlook are unaffected by the company’s restatement announcement.

Judge Declares Mistrial in Quattrone Case

U.S. District Judge Richard Owen declared a mistrial in the obstruction-of-justice case against former Credit Suisse First Boston banker Frank Quattrone after the jurors told the judge they were unable to reach a unanimous verdict.

Jurors had been at an impasse since October 17. They didn’t deliberate for two days last week because the wife of one of the jurors was delivering a baby.

The six-man, five-woman jury was split 8-3 for conviction on count 1, obstructing a federal grand jury investigation, and count 3, witness tampering, according to the wire service, citing juror Mayo Villalona, an employee of HSBC Holdings Plc.

The vote on count 2, obstructing an investigation by the Securities and Exchange Commission, was 6-5 for acquittal, added Villalona.

“The government should take this as a sign to be more careful in the type of cases they bring,” Stanley Arkin, a New York criminal defense attorney, told Bloomberg.

Quattrone refused to comment to reporters when he emerged from the courthouse. His lawyer, John Keker, said he was disappointed the jury did not acquit his client “because Frank Quattrone is innocent.” Keker added that Quattrone is “a man of integrity, and he’s a man that followed the rules.”

Juror No. 5 laid some blame on the defense, reported Bloomberg. According to the wire service, the juror said that Keker’s decision to call his client as a witness probably cost him an acquittal. Quattrone initially testified he wasn’t involved in allocating IPO shares to clients, but then reversed himself and admitted he played a role in distributing IPO shares.

The trial of Quattrone, who reportedly earned $120 million in 2000, was the first criminal case related to the IPO boom of the late 1990s. The U.S. attorney’s office has not decided whether to try Quattrone again, according to Bloomberg, citing spokesman Herbert Hadad.

Dana’s Takeover Defense Pays Dividends

If at first you don’t succeed, bribe your shareholders.

To fend off a hostile takeover bid by rival ArvinMeritor Inc., last week car-parts maker Dana Corp. declared a sixfold increase in its quarterly dividend.

“Increasing the dividend at this time is also consistent with our expectation of continued improvement in earnings and cash flow,” said Glen Hiner, Dana’s acting chairman, in a statement. “We are pleased that our continuing success in executing our restructuring plan has enabled us to provide our shareholders with this dividend increase.”

This kind of confidence and payout could help convince shareholders to reject ArvinMeritor’s offer.

In July, ArvinMeritor offered $15 per share in cash, valuing Dana at $2.2 billion. However, since then the stock has traded above $15, suggesting that investors believe the company is worth more than what their suitor offered.

On October 2, ArvinMeritor extended for a second time the expiration of its tender offer for all of Dana’s outstanding shares.

Top Seagate Shareholders Pledge Not to Sell

Spooked by the big sell-off in its stock last week, Seagate Technology said its principal shareholder, New SAC, will not sell any shares of the company for the duration of its lock-up period, which expires on January 20, 2004.

In addition, chief executive officer Steve Luczo, president Bill Watkins, and chief financial officer Charles Pope each said they will not sell any shares during the lock-up period.

Earlier last week, the company announced a modification of the 180-day lock-up, which would have permitted New SAC to sell its 16 million shares and for executive officers to sell about 4.3 million shares, beginning last Wednesday.

The lock-up period began after the company’s $ 1.3 billion secondary share offering in July. The company went public last December after going private in a leveraged buyout back in December 2000.

Seagate’s stock dropped nearly 25 percent last Wednesday after it announced that it recently received a request from the Securities and Exchange Commission for all research analyst reports regarding the company that were published between January 1, 2000, and August 30, 2003.

Short Takes

  • Call it the anti-1990s IPO. Carter Holdings Inc., an apparel company that has been around for nearly 140 years, finally went public on Friday. It was well worth the wait.

The stock closed up about 28 percent, at around $24.35. The company hopes to raise as much as $119 million and plans to use about $61.3 million to repay some of its $291.9 million debt.

  • Life insurer Principal Financial Group Inc. said it would raise its annual dividend 80 percent, to 45 cents a share.
  • Citigroup Inc. issued $1 billion in 30-year global subordinated bonds in a self-led deal. They were priced to yield 6.039 percent, or 90 basis points over comparable Treasurys. The bonds were rated Aa2 by Moody’s and A-plus by Standard & Poor’s.
  • The SEC reappointed Charles D. Niemeier to the Public Company Accounting Oversight Board. Niemeier will serve a five-year term upon the completion of his current one-year appointment this month. Previously Niemeier was the chief accountant in the commission’s Division of Enforcement and co-chairman of the commission’s Financial Fraud Task Force.
  • Smurfit-Stone Container Corp. said it will cut about 1,400 jobs, or 4 percent of its workforce, and close a Canadian mill as part of a plan to save about $140 million.
  • Shares of Cablevision Systems Corp. plunged on Friday after the company announced plans to spin off its Rainbow cable channels.

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