Xyratex Files for IPO

Add another name to the list of storage companies going public: U.K.-based Xyratex has filed an F-1 with the U.S. Securities and Exchange Commission (SEC), detailing plans to sell 6.96 million shares at $15 to $17 in an initial public offering. Xyratex listed Credit Suisse First Boston Corp., Citigroup, Banc of America Securities LLC, and RBC Capital Markets as underwriters for the offering.

It appears that Xyratex's storage subsystem rival Engenio Information Technologies Inc. will beat it to the punch, though. Xyratex anticipates going public June 28 according to documents field with the SEC today. Engenio has not said when it will complete its IPO, but it is expected to be sometime next week.

Engenio, formerly LSI Logic Storage, filed an S-1 announcing its intentions to spin off from LSI Logic Corp. (NYSE: LSI) Feb. 24. When it announced it would change its name to Engenio last month, the company said it is on schedule for its IPO by the end of June (see LSI Storage Becomes Engenio).

Xyratex plans to trade on the Nasdaq under the ticker XRTX.

Xyratex sells storage systems to OEMs and test systems to disk drive manufactures. Network Appliance Inc. (Nasdaq: NTAP), Seagate Technology Inc. (NYSE: STX), and Western Digital Corp. (NYSE: WDC)are its biggest customers, accounting for approximately 78 percent of its fiscal 2003 revenues. Xyratex also sells Emulex Corp.'s (NYSE: ELX) embedded switches from a relationship with Vixel before it was acquired by Emulex (see Xyratex Deploys Emulex and Seagate, Emulex, Xyratex Demo 4 Gbit/s FC).According it its filing, Xyratex had income of $17.9 million on revenues of $119 million for the quarter that ended Feb. 29. LSI Logic reported its storage generated $115.5 million in revenue for the same quarter.

Xyratex said its revenues grew from $83.6 million 1999 to $333.8 million last year, representing a compound annual growth rate of 41.4 percent. Although both LSI Logics storage company and Xyratex generated similar revenue selling similar products through OEMs, Xyratex had a far lower profile than LSI.

“It’s a decent company that you probably never heard of,” says Punk Ziegel & Co.

financial analyst Steve Berg, who expects Xyratex to go public by the end of the month. “They can go any time now.”

Xyratex spun off from IBM Corp. (NYSE: IBM) in December 1994 in a management buyout. As part of IBM, it was a manufacturing and product development operation. According to its filing, Xyratex “restructured our business through acquisitions, disposals, and organic investments to form our core global storage and networking technology business” after the buyout. Last February, Xyratex acquired the business of ZT Automation, a California company that sells magnetic disk media handling automation technology used in disk drive production.

Xyratex or Engenio will likely become the first storage company to go public via IPO since Seagate in December 2002 (see Seagate Goes Public With a Whimper). Industry analysts believe backup software company CommVault Systems Inc. will follow later this year (see CommVault 'Well Positioned' for IPO and CommVault Locks In Dell).— Dave Raffo, Senior Editor, Byte and Switch