Please ensure Javascript is enabled for purposes of website accessibility

PortalPlayer Replays Late '90s Tunes

By Tom Taulli – Updated Nov 16, 2016 at 4:29PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Did investors forget about the IPO bust?

If ever there was a clear-cut sign that IPOs are back: On Friday, when the Dow Jones and Nasdaq plunged, a company called PortalPlayer (NASDAQ:PLAY) saw its stock surge 51% to $25.80 on its IPO debut. In fact, volume was about 10.4 million shares for the day. Keep in mind that the company issued about 6.25 million shares.

Something else: Before the IPO, the company bumped its price range from $11 to $13 to $14 to $16. And then it priced the IPO at $17 -- allowing the company to raise a cool $106.25 million.

PortalPlayer is a fabless semiconductor company. That is, the company does not produce anything; rather, it creates the blueprints for semiconductors whose production is outsourced.

The company was smart to focus on what has become a cultural phenomenon in personal media players: Apple's (NASDAQ:AAPL) iPod. In the IPO world, that's a "story" that can sell a lot of shares to the public.

However, keep in mind that more than 90% of PortalPlayer's revenues come from the iPod. True, this is not a problem if the iPod continues to sizzle (which it probably will). The question is: What if Apple decides to go with another solution or try to squeeze PortalPlayer?

Steve Jobs, the CEO of Apple, is brilliant, as well as tough. Case in point: Pixar (NASDAQ:PIXR), another company in which he presides as CEO. With the huge success at the box office, Jobs wants to take much of the profits away from his longtime partner, Disney (NYSE:DIS).

Perhaps there is already a squeeze on PortalPlayer. For example, even though revenues for the company have skyrocketed from $12.8 million for the first nine months of 2003 to $47.8 million this year, the company still cannot post a profit.

And there is certain to be competition. No doubt, other chip companies are envious of the success of PortalPlayer, such as Intel (NASDAQ:INTC) and Texas Instruments (NYSE:TXN).

But, in the wacky IPO world, such things are in the long term. If anything, the iPod will likely experience a huge Christmas, giving PortalPlayer's stock price even more excitement for day traders and momentum investors.

Fool contributor Tom Taulli does not own any shares mentioned in this article.

None

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

The Walt Disney Company Stock Quote
The Walt Disney Company
DIS
$99.50 (-2.60%) $-2.66
Apple Inc. Stock Quote
Apple Inc.
AAPL
$150.43 (-1.51%) $-2.31
Intel Corporation Stock Quote
Intel Corporation
INTC
$27.52 (-1.96%) $0.55
Texas Instruments Incorporated Stock Quote
Texas Instruments Incorporated
TXN
$161.29 (-0.82%) $-1.33

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
339%
 
S&P 500 Returns
109%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 09/24/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.