Today: The calm after the storm elapsed Friday on Wall Street, as Palo Alto Networks and Kayak Software ushered technology back into the initial public offerings realm with substantial increases. Also: The rest of Wall Street has a poor Friday showing, Facebook and Google (GOOG) "acqhire" more talent.
Two tech IPOs hit it big on Wall Street as 'Facebook freeze' thaws
Two months after Facebook arrived on Wall Street with a thud, Silicon Valley had its first stock market debut Friday, and Palo Alto Networks paired with Kayak Software for a stellar technology showing.
Santa Clara network-security company Palo Alto Networks received a lot of solid buzz before its Friday debut, as it followed a successful formula for tech IPOs in the past year: Sell enterprise software that businesses need and want, and show solid revenue growth.
The company is known for its improved firewall technology -- "We've reinvented the firewall," CEO Mark McLaughlin said Friday -- developed by founder and CTO Nir Zuk, a former Check Point star. Revenues have been building quickly, rising from $13.4 million to $48.8 million to $118.6 million in the past three fiscal years, and the company raked in just shy of $180 million
"The numbers on Palo Alto are outstanding -- of all the cloud-based IPOs that have debuted in 2012 and prior, the numbers in growth in the top and bottom line stand apart," Scott Sweet, senior managing partner of IPO Boutique, told The Street.
Investors must have voiced their positive thoughts about the company's growth, as Palo Alto Networks twice increased the price of their IPO shares -- from a maximum of $37 to a maximum of $40 to a final price of $42. The company sold at least 6.2 million shares at that price, bringing in $260.4 million at a valuation of roughly $2.8 billion.
When the stock appeared Friday morning on the New York Stock Exchange, the price went even higher. Palo Alto Networks opened at $55.15, a pop of 31.3 percent, and sold for as high as $62.07; trades settled at a level between $55 and $57, until a sudden downturn just before the bell provided a closing price of $53.13, a 26.5 percent premium over the IPO price.
Kayak Software was not as hyped as Palo Alto Networks, as it is a consumer-facing website, a sector that has not been as popular for investors of late and could be affected even more by Facebook. However, the company still found buyers for its IPO stock and saw its first day of trading end with an even larger increase than the other tech debut of the day.
Kayak, which runs the travel website of the same name, pulled in more than $90 million at a $1 billion valuation after pricing IPO shares at $26, also higher than its stated price range. The Norwalk, Conn., company's stock opened at $30.23, a 16.3 percent pop, and sold for as high as $35 before closing at $33.18, 27.6 percent higher than the IPO price.
While some analysts had doubts about Kayak, competitors such as Expedia and Priceline have seen their stocks soar in the past three years, and the company has increased revenues the last three years running, all of which have ended with a net gain.
The news wasn't all good for the IPO market, as Fender Instruments, the legendary guitar maker, canceled its planned IPO Thursday night. And analysts said that Friday's action should not lead anyone to believe that investors are no longer wary of technology IPOs in the wake of Facebook's lackluster performance.
"We're not ready to take out the horns and say the Facebook IPO didn't hurt," IPO Boutique's Sweet told the Mercury News on Friday afternoon. Although he termed the Facebook fiasco "a catastrophic mess," he noted that investors will embrace companies "with a strong niche, low debt and a revenue stream that is showing strong growth."
Palo Alto Network's CEO agreed, when asked Friday if he was frightened by going public in the post-Facebook market.
"(If) investors view a strong franchise that gives a lot of value to its customers, it doesn't really matter when you go (public)," he said.
Tech stocks fall back after otherwise successful week
The rest of Wall Street didn't live up to the rookies' examples on Friday, as the week's earlier positive movement based on strong tech earnings gave way to fear and doubt.
Technology stocks finally took a step back, after rising strongly since Intel (INTC) quieted fears of a disaster in the making for tech companies with its earnings announcement earlier this week. The tech-heavy Nasdaq lost 1.4 percent and the SV150 index of Silicon Valley's largest companies dipped 1.2 percent.
Intel rival Advanced Micro Devices -- the Sunnyvale semiconductor company that sparked fears of lessening demand for tech with a cut to its forecast last week -- suffered for Thursday's poor earnings report, falling 13.2 percent to $4.22, it's lowest closing price in nearly three years. Other chip companies suffered as well, with Intel declining 2.1 percent, Applied Materials dipping 1.7 percent and Nvidia falling 2.9 percent. Milpitas-based SanDisk bucked that trend, however, rising 10.3 percent after its Thursday earnings report.
Other tech sectors failed to avoid Wall Street's clawbacks from earlier gains. Hardware companies like Apple (AAPL) (down 1.6 percent) and Hewlett-Packard (HPQ) (down 2.6 percent), and software companies such as Oracle (ORCL) (down 2.4 percent) and VMware (down 3.2 percent) fell back after otherwise successful weeks.
Silicon Valley companies that did manage to gain on Friday included long-suffering Zynga, which increased 5.4 percent after bringing on its first female board member; eBay (EBAY), which rose 2.1 percent as it continues to bask in its solid earnings report; and Yahoo (YHOO), which grew by 1.2 percent at the end of its first week with Marissa Mayer leading the company.
Google, Facebook continue fight for talent with acquisitions
Google also found gains despite overall weakness on the stock market Friday, thanks to Thursday's earnings report. However, the Mountain View search giant didn't rest on its laurels in Silicon Valley's ongoing quest for engineering talent, matching a Facebook deal with one of its own.
Google acquired Paris-based Sparrow, a company that made a popular email client for Mac computers and the iPhone, and will insert them into the Gmail team. The price of the deal was not disclosed, though The Verge reported it was for less than $25 million.
Facebook also looked at makers of popular Apple applications, "acqhiring" Acrylic founder Dustin MacDonald, who had developed the Pulp news reader and Wallet personal-information storage apps. The terms of that deal were likewise not disclosed.
Both companies have been on a run of similar deals, with Facebook locking up talent in five deals since the beginning of May and Google buying more than 140 companies since the beginning of 2010.
Google shares increased 3 percent and closed higher than $600 for the first time since late May, at $610.82. Facebook stock fell slightly, closing with a loss of 0.8 percent at $28.76.
Silicon Valley tech stocks
The tech-heavy Nasdaq composite index: Down 40.60, or 1.37 percent, to 2,925.30
The blue chip Dow Jones industrial average: Down 120.79, or 0.93 percent, to 12,822.57
And the widely watched Standard & Poor's 500 index: Down 13.85, or 1.01 percent, to 1,362.66
Check in weekday afternoons for the 60-Second Business Break, a summary of news from Mercury News staff writers, The Associated Press, Bloomberg News and other wire services. Contact Jeremy C. Owens at 408-920-5876; follow him at Twitter.com/mercbizbreak.