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Xyratex Swims in Public Pool

The first storage company to go public in 18 months received a tepid welcome today when Xyratex Ltd.'s (Nasdaq: XRTX) IPO price of $14 came in below its expectations.

When it filed to go public earlier this month, Xyratex hoped for a share price between $15 and $17, which would let it raise up to $128 million (see Xyratex Files for IPO). Instead, its sale of 6.96 million shares raised $97.4 million. Of that, $52.2 million goes to the company and the rest to investors and underwriters, including Credit Suisse First Boston Corp., Citigroup, Banc of America Securities LLC, and RBC Capital Markets.

Still, Xyratex has gotten the IPO ball rolling, and other storage companies intend to follow the U.K.-based company this year. So far, Xyratex competitor Engenio Information Technologies Inc. (see LSI Storage Becomes Engenio) and blade server startup Egenera Inc. have filed to go public (see Egenera Files for IPO, Robert M. Dutkowsky, President, CEO & Chairman, Egenera, and Egenera Generates $30 Million). Egenera filed for its IPO within hours of Xratex's pricing, but has not scheduled a date for its own pricing. Engenio spokespeople originally targeted the end of June for its IPO pricing, but it appears now it will wait until at least next month.

Xyratex sells storage systems to OEMs and test systems to disk drive manufacturers, and its competitors include Adaptec Inc. (Nasdaq: ADPT), Dot Hill Systems Corp. (Nasdaq: HILL), and Engenio. It spun off from IBM Corp. (NYSE: IBM)
in 1994.

According to SEC filings, Xyratex had net income of $17.9 million in the first quarter of this year on revenues of $119.3 million, after losing $52.5 million on revenues of $99.4 million the previous quarter. The 2003 loss was due to a $57.5 million charge related to stock compensation the company took in November. Xyratex estimates it will report revenues for the quarter ended May 31 of about $108.1 million, up from $75.4 million for the same quarter last year.

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