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MARKET COMMENT
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Oh goody, tech flotations are back with a vengeance. Wolfson Electronics (LSE: WLF), a semiconductor company based in Edinburgh, made its stock market debut today. It's the first tech share to get a main market listing for 18 months. Not only were the shares priced at the top end of the indicative price range of 155p to 210p, at the time of writing, they'd risen by 22% to 256p. This gives the company a valuation of £260m. Considering the price, value investors won't think much of the company's financials. Sales for 2002 came in at £22.4m while profits were £2.4m. Still, this did represent sales growth of 100% from the previous year. In the first half of 2003, progress continued with sales of £17.5m and a profit of £2.5m. Impressive stuff, but the valuation is pricing in a few years of these heady growth rates. Wolfson is raising £25m of new money from the float, which it will invest in marketing and developing its range of microchips. Although some of the institutional shareholders are cashing in, encouragingly, none of its directors have sold any shares. Its customer list looks fairly impressive, boasting names like Apple (Nasdaq: AAPL), Hewlett-Packard (NYSE: HPQ), Microsoft (Nasdaq: MSFT) and Toshiba. Wolfson has been around for some time, starting as a design house in 1984 before making the decision to supply its own products in 1995. One potential fly in the ointment was a recent legal challenge from Cirrus Logic, claiming that Wolfson had infringed its patents. This delayed the flotation for a few days but the company's initial view is that the claim has no merit. It's a reminder for tech investors though as to just how fragile these companies can be. You never know who's developing competing products somewhere else in the world, with the potential to swiftly change the market. It's interesting to compare some of Wolfson's stats with Bookham Technology (LSE: BHM), another technology designer and manufacturer, which first graced the stock market in April 2000. Bookham could only boast quarterly sales of £2.5m and a quarterly loss of £5.6m when it floated. Yet its shares leapt by 150% on its first day of trading, valuing it at £2.5b. Ah, those were the days. Let's hope they never return! Wolfson's valuation looks very demanding, but nowhere near the la la land prices we saw a few years ago. More: Wolfson website | News announcements