Agere Systems prices, finally

In the next episode of the IPO that won't go away, Agere Systems Inc. priced 600 million shares at US$6 yesterday. The deal priced at the low-end of the thrice-revised range, originally as high as $20 per share. Shares to be offered jumped from 300 million to 600 million.

The Lucent Technologies spinout, which makes semiconductors for optical components, hits the market the day after telecom equipment maker Nortel Networks announced layoffs and lowered guidance for the second time this quarter. Nortel's stock was down almost 12 percent in after-hours trading Tuesday and was leading other tech stalwarts lower. Optical component leader JDS Uniphase was down 5.3 percent.

But just because an issue prices doesn't mean it has to start trading the next day. And when the offering does trade, it could fall flat. "There's a perception about the way the deal was handled," says Randall Roth, an analyst for the IPO Plus Fund. Roth said he saw few positive signs in the way the deal was handled by lead banker Morgan Stanley.

"They're selling on the cheap," Roth says.

Morgan Stanley was originally slated to receive 200 million shares of Agere as a debt payment from Lucent. Morgan would then offer those shares up for sale in the offering. However, after the most recent restructuring of the deal last Thursday, Morgan's shares were nowhere to be seen. Instead, the company reverted to the standard role of lead underwriter.

After the offering, there will be approximately 1.6 billion shares of Agere outstanding, 1 billion of which will be Class B shares held by Lucent. Based on the pricing, Agere's market value will be just under $10 billion, a far cry from the $26 billion valuation originally sought.

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