Chip IPOs fail to impress

Two venture-backed semiconductor makers had disappointing debuts on Nasdaq on Friday, Dec. 14, as looming concerns over a slowdown in consumer spending on electronics coupled with a generally weak market day kept many investors on the sidelines.Intellon Corp. an Ocala, Fla., maker of chips that enhance high-speed communication over electrical wiring, priced below its expected opening range of $9 to $11. By late afternoon, it was selling at $6.70.

Meanwhile, Memsic Inc., an Andover, Mass., company whose chips are used in motion- and pressure-sensing applications such as video game controllers, opened at $10, below an expected range of $11 to $13 per share. By late in the trading session, the company's shares were selling around $10.30.

While these lackluster debuts came on a down day for U.S. stocks in general, analysts said they also reflected looming fears of a semiconductor slowdown early next year, which could hit chips used in entertainment devices particularly hard.

"There is certainly a lot of concern surrounding semiconductor stocks," said Robert Burleson, an analyst with ThinkEquity Partners. "People are worried about an inventory correction in PCs and consumer electronics early next year," he said, citing growing signs of weak enterprise demand and consumer spending.

The sullen debuts of Intellon and Memsic follow the IPO of another chipmaker, San Diego's Entropic Communications Inc. Entropic went public Dec. 7 after scaling back its offering to 8 million shares at $6 from an originally planned offering of 10 million shares at between $9 and $11. Although that stock rallied to $7.40 per share on its first day of trading, it has since retreated and was selling around $6.30 per share in late trade on Friday.

Intellon, an 18-year-old company, was restructured in 2003 and has received at least $66 million in venture backing since then from a long list of backers including Samsung Ventures of San Jose, Calif., Goldman, Sachs & Co. of New York, BCE Capital of Toronto, Comcast Interactive Capital of Philadelphia and Duchossois Technology Partners of Elmhurst, Ill.

The company more than doubled its revenue last year, to $33.7 million from $16.6 million the year before, while trimming its net loss to $7.8 million from $12.5 million.

Memsic's backers include Still River Funds of Waltham, Mass., InveStar Capital Inc. of Taiwan, Celtic House Venture Partners of Ontario and Pan Jit International of Taiwan.

In 2005, Memsic generated a small profit of $55,000, which it grew to $498,000 in 2006. Its revenue grew to $13.1 million in 2006 from $9.1 million the year before.

Despite the strong financial improvement shown by both these companies, analysts argued that they were at risk of a lengthy contraction in business if consumer spending slowed significantly after the holidays.