Halfway through 2005, Jazz Semiconductor Inc. doesn’t seem any closer to selling shares to the public.
Newport Beach-based Jazz, which makes chips under contract from other companies, split from Conexant Systems Inc. next door in 2002.
Jazz’s public stock debut was seen coming as early as 2004. But, so far, Jazz hasn’t said anything publicly about its offering plans. Neither has Conexant, which still owns some 40% of Jazz along with Washington, D.C.-based Carlyle Group, which owns 47%.
The lack of word on a Jazz offering isn’t for lack of interest. Each quarter, analysts ask Dwight Decker, Conexant’s chief executive, about the status of Jazz’s planned offering.
“We were very close to doing that in the first half of 2004,” Decker said in a January call with analysts. “We could have easily done it, and maybe we should have. But it didn’t happen at that time. But we think it’s still absolutely on the table. The second half of 2005 is what we are currently hopeful of.”
Then in April, Decker was less specific when he said Jazz will “have some liquidity” this year.
An actual pricing of Jazz shares for an offering hasn’t happened.
As originally billed, Jazz’s offering was projected to raise as much as $150 million, which would rank it among the larger offerings locally this year.
A Jazz offering is a key part of Decker’s long running restructuring of Conexant, in which he’s sold off businesses and done another spinoff, that of Newport Beach-based Mindspeed Technologies Inc.
Jazz had about $225 million in sales for 2004, up from $185 million in 2003, according to Decker.
Timing still could be on Jazz’s side.
The Philadelphia Semiconductor Index, a benchmark for chip stocks, rose 11% in May. A bevy of stock analysts are praising chip shares as a wiser investment for fund managers looking to diversify out of slow growth stocks.
“We feel pretty good about the IPO market at end of the year,” said Aaron Gurewitz, managing director of equity capital markets at Newport Beach’s Roth Capital Partners LLC.
But it hasn’t been smooth sailing for companies that have gone public this year.
For one, many companies debuted at prices below what they originally had hoped for.
In April, half of the companies that went public did so below their intended ranges. Thirty-six percent debuted below their anticipated ranges in May, according to figures from Thomson Corp.’s Thomson Financial.
“Over the last month, there have been a lot of companies that have had to refile with lower ranges,” Gurewitz said. “We saw several transactions that refiled lower and then had to refile again, lower than that. The biggest issue is just valuation.”
Aside from market concerns, Jazz has its own issues. The company’s main customers,Conexant and Skyworks Solutions Inc.,still are struggling. Conexant and Massachusetts-based Skyworks account for about 75% of Jazz’s sales.
Skyworks recently told analysts revenue in the quarter ending June 30 would be below what analysts had expected.
Similarly, North Carolina’s RF Micro Devices Inc., a Jazz investor and customer, posted a wider loss in the March quarter.
RF Micro, which makes chips for wireless gear, invested $60 million in Jazz in 2002.
Conexant, which has struggled since buying Red Bank, N.J.-based GlobespanVirata Inc. in early 2004, is a relative bright spot. The company said it expects sales for the June quarter to rise 12% to $190 million, beyond what analysts were looking for.
