Tale of Two IPOs: Avago and CDC Software

As expected, Avago (AVGO) had a strong offering. The company priced at the top of its range at $15. From there, the stock went up 8% to $16.17 on its first day of trading. In fact, Avago issued 43.2 million shares, which was seven million more than expected.

Over the past few years, Avago has undergone serious restructuring, in terms of layoffs and rationalization of the supply chain. Such things are critical in the deathly competitive semiconductor sector.

And with signs of an economic turnaround, Avago should be positioned nicely for profitability.

On the other hand, we saw another IPO that was, well, ugly: CDC Software (CDCS). The stock plunged 17% on its first day of trading.

Why the horrible response? It’s really about the growth story (or lack of one). While the company has a strong base of customers, it is going to be tough to get traction. Keep in mind that there are cloud-computing alternatives that are making inroads in the space. Ultimately, CDC is a company that will wind up being bought up by a bigger player, such as an Oracle (ORCL).