Cisco-Backed Cbeyond Sees $73M

Atlanta-based Cbeyond Communications didn't have a Google-like debut on the public markets, but the CLEC did raise about $73 million as it offered 6.1 million shares at $12 a share on Wednesday (See Cbeyond Joins Nasdaq.)

The four-year-old carrier's offering was managed by Deutsche Banc Securities Inc. who led the IPO, with Raymond James Financial Inc. , Thomas Weisel Partners, and ThinkEquity Partners.

Cbeyond's stock traded flat on Wednesday, both opening and closing at $12 a share with more than 3 million shares changing hands.

Cbeyond sells an integrated package of VOIP, high-speed Internet access, and Internet-based business applications (including IP Centrex) to small businesses in Atlanta, Dallas, Denver, Houston, and Chicago. The company, which began connecting customers in 2001, says it was providing broadband service to roughly 16,000 customer locations by the end of March 2005. (See Cbeyond Picks BroadSoft .)

The company says it will use proceeds from the IPO to fund future capital expenditures and to move into six new markets by the end of 2008. Next year, Cbeyond has an arrangement with a national wireless carrier to provide an integrated package of landline and wireline voice, as well as a host of IP-based data services to its target market -- businesses with 4 to 200 employees in large metropolitan cities.

Cbeyond apparently had prepared itself for a cool Wall Street response to its IPO. The company originally intended to price its shares at between $16 and $18 a share, but changed its mind several times in the past few weeks and finally opened at $12 a share.

Cbeyond’s revenues have grown steadily from $21 million in 2002 to $113.3 million in 2004. And the growth seems to be continuing. The company reports $35.2 million in revenue during the first three months of 2005, an increase of 43.6 percent over sales in the same period last year.

The carrier is not yet profitable, but its net losses have been narrowing steadily from its $47.2 million loss in 2002. It lost $11.5 million in 2004.

One party powering -- and hoping to cash in -- on Cbeyond's success is Cisco Systems Inc. (Nasdaq: CSCO), through its Cisco Systems Capital Corp. subsidiary.

Cisco Capital extended Cbeyond a line of credit totalling more than $100 million in 2002, of which the company had borrowed nearly $80 million as of December 31, 2004, according to Cbeyond's SEC filings. Cisco, through Cisco Capital, now owns nearly 7 percent of Cbeyond's shares.

— Mark Sullivan, Reporter, Light Reading